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Thinking of Buying a New Car? Now is Not the Best Time

Last week, the Federal Reserve boosted a key interest rate by half a percentage point. This marks the Feds largest boost in over 20 years and borrowing costs for a variety of consumer loans including car loans are expected to soar.

Overview

The increase of the key interest rate is predicted to be felt on all income levels, whether someone is buying a new luxurious car or looking for a reliable used car. According to director of insights for Edmunds Jessica Caldwell, their will be a small impact for everyone but will mostly affect new car buyers that are looking for something luxurious.
Caldwell also stated the biggest impact will be felt by purchasers of used cars. “Given used car prices are already at record highs, this increase will only make this market more expensive, and buyers will be forced to sit out due to affordability or buy an older vehicle to keep payments within a digestible range.”

jeep vehicle

Struggling Auto Industry

The Automotive industry has been battling with a very limited inventory since the start of the pandemic in 2020, and the ongoing shortage of computer chips is causing the production of these vehicles to become much more expensive than ever before.
According to recent data from the U.S. Bureau of Labor Statistics, new car prices have been increasing by 12.5 percent every single year. The data also shows that the average price of a used car has increased roughly 35 percent since last year.

How Much Do Vehicles Cost?

According to an estimate from J.D. Power, the average price paid for a new car is $45,232, with the average monthly payment totaling at $650 over a period of six years, according to Edmunds. The average going price for a used car is over $30,000 with a monthly payment of $545 for roughly six years according to the data provided by Edmunds.

Wrap Up

Due to the hike in interest rates being the highest in over 20 years, all consumers may be affected by the increase in prices. During these times, try not to put as many miles on your car and avoid buying a new or used vehicle if it is not necessary. If buying a vehicle is necessary, talk with your accountant or advisor to go over the best financing options.

 
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