Rising prices for new and used vehicles have been a fact of life in the automotive business for months in the wake of the COVID-19 pandemic and a new set a data points underscores the trend.
Edmunds.com, the online automotive buyers site, reports 14.3% of consumers who financed a new vehicle purchase in the third quarter of 2022 committed to a monthly payment of $1,000 or more — the highest level that Edmunds has on record — compared to 12.2% in Q2 2022 and 8.3% in Q3 2021.
In addition, more than 1 in 4 Americans who financed an EV, which are still relatively difficult to nail down, committed to a monthly payment of $1,000 or more this past summer when the secured their vehicle, according to Edmunds.
Monthly payments climb despite economic worries
“Despite worrisome macroeconomic conditions, Americans are spending more money than ever on new vehicle purchases,” said Jessica Caldwell, Edmunds’ executive director of insights.
“Ongoing inventory shortages are partly to blame, but this trend is also a reflection of consumer preferences. In the past decade, we’ve seen Americans embrace a bigger-is-better mindset by gravitating toward larger vehicles with more creature comforts, technology-heavy features and, more recently, electrified powertrains — but that all comes with added cost. Rising interest rates combined with higher prices has sent monthly payments soaring to new heights.”
Monthly payments for EVs lead the way
Overall, 26% of consumers who financed an EV committed to a monthly payment a monthly payment of $1,000 or more, compared to 24% of consumers who financed a plug-in hybrid, 14% who financed a gas-engine-only vehicle, and 4% who financed a hybrid vehicle, according to Edmunds analysts.
Though luxury brands dominate the list with monthly payments of more than $1,000, GMC took the seventh spot with 41% of its shopper base committing to a $1,000+ monthly payment and Ram took the 10th spot with 36% of its shopper base committing to a $1,000+ monthly payment.
Ford, however, wasn’t far behind, according to the data reviewed by Edmunds.
The Ford F-150, Ram 1500 and Chevrolet Tahoe captured the highest percentage of monthly payments over $1,000. The Ford F-150 made up 5.6% of all new vehicle loans made in Q3 with a $1,000+ monthly payment.
Wyoming, Texas and Utah had the greatest percentage of new-car shoppers who agreed to a monthly payment over $1,000. Edmunds noted 25.7% of the new vehicle buyers in Wyoming, 20.8% of the buyers in Texas and 19.1% of the buyers in Utah paid more than $1,000 per month for new vehicles.
“A pullback of lease incentives is yet another contributing factor to these rising payments,” said Ivan Drury, Edmunds’ director of insights.
“As leasing grows increasingly more expensive, more affluent consumers are instead opting to finance luxury brands and large vehicles. And with few lease or finance incentives expected from automakers in the coming months, and yet another rate hike by the Fed anticipated in November, we expect that monthly payments topping $1,000 will become even more common,” Drury predicted.