Monthly Car Payments Top $1,000 For Many, Edmunds Says

We’re all aware by now, consumers are in a bidding war for new cars and trucks.

Scarcity due to an ongoing computer chip shortage and other kinks in the supply chain are driving new-vehicle transaction prices to record or near-record levels just about every month. And now, higher interest rates contribute to higher monthly payments, too.

How high? The average monthly payment is on pace to top $700 in July, according to a forecast from J.D. Power and LMC Automotive. Based on the first 19 days dealerships were open in July, the average monthly payment was headed to $708 for July, the forecast said. That’s an increase of 12.8% vs. a year ago, or about $80 per month.

Keep in mind, that’s the average. According to Edmunds, in June a record 12.7% of consumers who financed a new-vehicle purchase signed up for a monthly payment of $1,000 or more. That’s up from 7.3% in June 2021, Edmunds said. Pre-pandemic, in June 2019, it was 4.6%.

And yet, the biggest, publicly traded new-vehicle dealer groups insist they could sell more cars and trucks if only they could get more.

“Consumer demand for vehicles remains extremely strong heading into the third quarter, and we continue to sell most units almost immediately upon receipt,” said Earl Hesterberg, president and CEO of Houston-based Group 1 Automotive, in a conference call to announce second-quarter earnings.

“This dynamic should continue throughout the third quarter and potentially much further out, assuming no material change in consumer demand,” he said.

Used-vehicle prices are up, too. It’s fair to point out that trade-in values are so high, that offsets at least some of the increase in new-vehicle transaction prices, said Bryan DeBoer, president and CEO of Lithia & Driveway Motors, Medford, Ore., in a separate earnings conference call.

“I think it’s important to remember in affordability, that when people are buying new vehicles, their used cars are so highly valued that the delta between the trade-in and the vehicle they’re buying,” has shrunk, DeBoer said.

Consumers have a benchmark on new-vehicle prices — that is, the manufacturer’s suggested retail price. But used-car values are “uncapped,” DeBoer said. In some cases, Lithia has noticed customers re-selling cars they recently purchased, for “something north of $5,000 to $10,000 more than what they paid,” he said.

It’s true that suggested retail price, also called sticker price, is a benchmark. However, new vehicles are in such demand, it has become routine across the industry for customers to pay more than sticker price, which was unheard-of before the pandemic.

According to J.D. Power and LMC Automotive, the average new-vehicle retail transaction price in July was expected to reach $45,869. The previous high for any month, $45,988, was set last month, in June 2022.