Cost to finance a new car hits a record $656 per month — and auto shoppers could pay even more with latest Fed rate hike

Jeff Schuster, LMC automotive's president of Americas operations and global vehicle forecasts, said there is not enough sellable vehicles to support demand.

In addition to a persistent shortage of computer chips, manufacturers face additional supply-chain risks, including the ongoing war in Ukraine and Covid- related lockdowns in China.

The latest data from the U.S. Bureau of Labor Statistics shows that new car prices are up 12.6% and used car prices are up 16.1%.

The cost of financing a car is going up due to higher interest rates. There is a chance of another hike at the July meeting.

According to the J.D. Power/LMC automotive forecast, the average transaction price for a new car in May was $43,832. Consumers are paying an average of $32,450 for used cars.

Median weeks of income needed to purchase a new car rose to 41.3 weeks in May from 40.8 weeks in April, and is up from 35 weeks a year ago.

There are ways to bring the price of a new or used car down. There are some tips from the internet.

• Know your trade-in value. The extra equity from a trade-in is your biggest negotiating tool in today’s market.
• Know your pre-approved interest rate (i.e., from a credit union or bank). Even if you have excellent credit, it’s good to get pre-approved for a loan and know what interest rate you qualify for — which helps determine how much car you can actually afford — and then see if a dealership will match or beat the rate you can get elsewhere.
• Know your overall budget. With prices and interest rates heading higher, you may not be able to afford as much car as you think. Consider costs aside from monthly payments, including depreciation, taxes, fees, fuel, maintenance and repairs.