Share of new car buyers with a monthly payment of more than $1,000 hits record high

New research shows that the cost of financing a new or used car is increasing.

The share of new car buyers with a monthly payment of more than $1,000 rose to a record high.

J.D. Power and LMC automotive estimated that the average price for a new car in December was $46,382. The market is cooling but sticker prices are still up 2.5% from a year ago.

The interest rate on new car loans was up from a year ago. Consumers with higher credit scores may be able to get better auto loan terms if the Federal Reserve continues to raise interest rates.

Interest rate hikes have made financing a car more expensive and harder to find.

Thomas King, president of the data and analytics division at J.D. Power, said in a statement that elevated pricing coupled with repeated interest rate increases are inflating monthly loan payments.

More consumers face monthly payments that they can't afford because of high prices and rising rates.

For the first time, more than 15% of consumers who financed a new car in the fourth quarter of 2022, committed to a monthly payment of $1,000 or more, the highest level on record.

It doesn't begin to describe it. It is very confusing when you factor in the financing.

He said that many Americans are choosing SUVs and pickup trucks with all the bells and whistles, which can cost more than the base price.

Car shoppers should ask themselves if they are buying too much car because base models rarely hit the street.

He said there could be a perfect substitute at half the price.

A customer looks at a vehicle at a BMW dealership in Mountain View, California, on Dec. 14, 2022.

Car buyers are at greater risk of going underwater on their loans as used car values decline if they shell out more to finance a car.

He said that consumers benefited from low interest rates and elevated trade-in values at the beginning of the epidemic.

Consumers have become less insulated from riskier loan decisions as we shift toward an environment with diminished used car values and rising interest rates.

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