Americans appear to be coping with rising car prices by taking out longer-term auto loans, according to Experian’s latest State of the Automotive Finance Market report.
In the second quarter of 2019, the average loan term for a new car rose to a record 69 months — nearly six years — while the average used-car term followed closely behind at 65 months, the report shows.
This comes as average monthly car payments are also on the rise: $550 on average for new cars and $392 on average for used, according to the report.
Want to know more?
- Why are people taking out longer-term loans?
- What can you do if you’re ready to shop for a vehicle?
- Ask an expert about rising car prices
Why are people taking out longer-term loans?
With car prices on the rise, the report indicates that Americans are opting for longer-term auto loans to help manage monthly payments.
The average price of a new car is now well over $37,000, according to the latest Kelley Blue Book data. This is over $700 more than the cost of a new car in August 2018.
What can you do if you’re ready to shop for a vehicle?
If you’re in the market for a new or used car, rising prices might leave you wondering how you can afford a car. But arming yourself with some basics about auto loans before you visit the dealership could help set you up for car-buying success.
- Understand how car loans work: If you’re a new borrower or have credit that needs work, it’s a good idea to do some research on the basics of car loans before you buy.
- Determine what kind of auto loan you need: If you choose the right loan for your situation, you may be able to save money, get a car that suits your needs and stay within your budget. The Consumer Financial Protection Bureau has information on auto loans that can help get you started.
- Shop around for the best auto loan for you: Before you walk into a dealership, shop around for a loan. You might be able to find a loan with terms that work for you ahead of time and apply for preapproval.
Ask an expert about rising car prices
Meet the expert: Brian Moody, executive editor for Autotrader and spokesperson for Kelley Blue Book, has more than 12 years of experience as an automotive journalist.
What’s the best way to cope with rising car prices?
“The best way to deal with high new and used car prices is to be flexible. The more you insist on having a very specific color and style of wheels and options, the less of a deal you’re going to get. If those things are super important to you, you should also be patient. Finally, look for vehicle types that are not popular. Full-size trucks and SUVs are not the place to be looking for a bargain.”
When do you think car prices will return to pre-pandemic prices?
“There is some evidence that new car prices have peaked. That means the worst is probably over and prices will start to normalize over time. But new and used car prices are driven by demand. If something is in demand, the prices will stay high. By the early part of 2023, prices will be more palatable for most consumers.”