HOUSTON — Thanks to the COVID pandemic and supply chain issues, the price of vehicles went through the roof.
People were paying well over sticker price just to secure the car or truck they wanted. But there is good news on the horizon. Morgan Stanley’s chief auto analyst now says deflation may finally be arriving for new cars. That’s thanks to supply finally catching up to demand.
But there is bad news as well. The interest rate on new car loans is shooting up. Edmunds data shows it is now at 5.7 percent, compared to 4.3 percent a year ago. And the federal reserve is expected to continue raising interest rates, so you can expect the rates for auto loans to continue to rise as well.
So while car prices are predicted to go down, that doesn’t mean monthly car payments will.
This comes as more and more buyers are signing up for big payments. Edmunds reports nearly 15 percent of all new buyers have agreed to monthly loan payments of a thousand dollars or more. That’s up from just over eight percent during the same period last year. Drivers may have stickers shock, but that doesn’t mean they are putting on the brakes.