Buying a New Car is Becoming a Luxury as Monthly Payments Surpass $700 a Month
Hoping for a new car in 2022? It could cost you more than you’d expect, experts say — even a modest family sedan or compact car could run you hundreds of dollars per month. According to an analysis from Cox Automotive / Moody’s Analytics, the average monthly car payment was $712 per month in May.
“I joke with people that every new car purchase is a luxury car purchase, I don’t care what you’re buying,” Ivan Drury, senior manager of insights at Edmunds, told NPR.
Rising car prices and rising interest rates have surpassed income growth, making new cars less affordable than ever. CoxAutoInc.com reported that Americans now need 41.3 weeks of their median income to purchase an average new car. Although median income grew by 0.3% in May, the purchase price for new cars grew by 1% and interest rates also rose. The average monthly payment increased by 1.7%, outpacing income growth. The average cost of a new car recently reached $47,000, NPR reported.
What does this mean if you’re in the market for a new car?
You may find you’ll have to sacrifice some features if you want to keep your car payments within your budget. Consider a lower trim package — the pre-determined features on a car that contribute to its price — or maybe even choose a smaller car.
Alternatively, you can take out a loan with a longer term to reduce your monthly payments. Auto loans typically range from three to five years, but you can look into financing with terms as long as 96 months.
Also be sure to shop around to make sure you’re getting the lowest interest rate. Although it’s convenient, financing your vehicle through the dealership may not always be a bargain. Consider using a credit union to finance your new auto loan, instead. For instance, Pentagon Federal Credit Union offers auto loans up to $150,000 with terms up to 84 months, according to GOBankingRates’ list of best credit unions for car loans.
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