It’s said that consumers looking to buy a car aren’t shopping for a price, but a payment. Average prices for new and used vehicles are at all-time highs, forcing those monthly payments to cross new thresholds.
New vehicle monthly payments passed $600 during the third quarter of this year, climbing to $614 a month, according to experts at car shopping website Edmunds. That’s nearly $30 a month compared with Q2’s average payment of $586 and $578 in the first quarter.
Buyers thinking they’ll save big money buying used are going to need to think again. The average monthly payment on a used car is now $500, up from $473 in the previous quarter and from $420 in the first period of the year.
If it is seems like there’s hardly a difference between the monthly payment on a new and a used vehicle, you’re right. Currently there’s just an 18% difference between the two averages — the smallest gap ever, the website noted.
Prices high despite efforts to ease the pain
The average transaction price for a new vehicle is more than $42,000, which is a new record. Unsurprisingly, that has trickled down to the used vehicle numbers as well. Edmunds expects it to climb to a record high of $27,306, compared to $25,854 in Q2 2021 and $21,697 in Q3 2020.
“Just when we thought we’d see a cooldown in used vehicle prices, they roared back in September, creating a bit of a roller coaster in the third quarter,” said Jessica Caldwell, Edmunds’ executive director of insights.
“These high prices combined with higher interest rates on the used side have shrunk the difference between new and used monthly payments more than we’ve ever seen before. Consumers considering a used vehicle rightfully might pause at the fact that today’s used monthly payment is nearly the same as a new monthly payment five years ago — particularly when they factor in the maintenance that might happen sooner rather than later.”
Edmunds experts note that used purchase conditions are likely to continue to be unfavorable for car shoppers through the rest of the year and advise consumers who need to make a car purchase to consider alternatives such as leasing or exploring certified pre-owned (CPO) vehicles.
What’s a buyer to do?
Aside from getting incredibly lucky and finding a dealer or individual seller that doesn’t realize prices are at all time highs, what’s a consumer to do? Lease.
“Leasing might offer cheaper monthly payments, and since a lease is a much shorter commitment than a purchase, you can explore makes or models that you might not have considered previously,” said Ivan Drury, Edmunds’ senior manager of insights.
“If you have your heart set on used, it’s worth doing some additional research into CPO options. Although they might seem pricier than other used vehicles at first glance, you’re more likely to get a subsidized interest rate, and can have a bit more peace of mind as these vehicles come with a warranty and are generally newer with lower mileage.”