By Nathalie Voit

New car buyers are increasingly shelling out more than $1,000 a month to finance their vehicles as rising interest rates coupled with a red-hot auto market render four-digit car payments more common.

According to new data from automotive research firm Edmunds, a staggering 12.7% of new-vehicle shoppers agreed to $1,000+ monthly auto loan payments in June. Edmunds said just 7.3% and 4.6% of new-car borrowers agreed to those terms in June 2021 and June 2019, respectively. The figure is also the highest ever recorded by Edmunds analysts.

Meanwhile, the average new-car finance tab reached $40,602 in the second quarter, a near-record number. In contrast, the average amount financed for new vehicles was $39,726 in the first quarter and $36,215 in Q2 2021.

This means the average new-car borrower in Q2 is paying $678 a month over the course of a standard 70.3-month loan with a 5% interest rate, according to Edmunds analysts.

This is significantly higher than last year’s average auto payment of $597, although, during the same period last year, the new-car finance data was based on an average loan term of 69.8 months with a 4.5% APR.

Edmunds notes that consumers opt for longer loans to make financing a new vehicle purchase more affordable.

“Consumers are exploring every possible avenue to make their next vehicle purchase affordable, and longer loan terms are a good example of that, even if that choice poses risks considering vehicle wear and tear and greater negative equity (the amount by which their loan balance exceeds their vehicles’ value) as their vehicle ages,” Edmunds’ senior manager of insights Ivan Drury said in a press release. 

Edmunds’ Executive Director of Insights Jessica Caldwell added:

“Low-interest rates used to be one of few reprieves for car shoppers amid elevated prices and supply shortages. But the Fed rate hikes this year are making finance incentives far costlier for automakers, and consumers are starting to feel the pinch.”

“Although there appears to be a steady stream of affluent consumers willing to commit to car payments that look more like mortgage payments, for most consumers, the new car market is growing increasingly out of reach.”