New cars got ever-so-slightly more affordable this year, with more incentives being offered to get inflation-weary buyers off the sideline. While this is good for your average buyer, there’s been a trend towards long loans with $1,000+ monthly payments that hasn’t reversed post-pandemic. In fact, new data shows it’s getting worse.
I feel confident that my Morning Dump proclamation that 2024 was going to be the year of the hybrid was correct, and I see no data to indicate that’ll change in 2024. Early Q4 numbers from Hyundai and Kia show real enthusiasm for cars with both kinds of powerplants.
Rivian is a pure EV company and has no hybrids to lean on, which means it has to convince people to buy its expensive electric vehicles. Supply shortages constrained production, but it looks like a strong end of the year allowed Rivian to squeeze out a sales increase this year (INB4 someone points out that Rivian still loses money on every vehicle).
Rivian wasn’t the only automaker with production issues this year. The entire nation of Italy saw its lowest production since… well, since most of us were born.
Nearly 1-in-5 Shoppers Spent $1,000 Or More On Monthly Payments In Q4
I managed to finance a new car this year and keep the monthly payments roughly similar to what I paid eight years ago. The catch? Because of a more expensive car and higher interest rates, I had to add 12 months of payments. It’s not ideal, and my current plan is to keep my Honda CR-V Hybrid for at least 12 years/120,000 miles.
Data shows that I’m the exception, benefiting both from a good credit score and a trade-in, which I got a good price for when I made my purchase. According to Edmunds, in Q4 a record 18.9% of consumers got a car loan for above $1,000 a month.
Some of this has to do with rates, of course, with Edmunds reporting that just 2.4% of all new vehicles were sold with a loan featuring 0% financing. Some relief appears to be coming with the average APR dropping to 6.8%, down slightly from last quarter.
“Although they tend to skew a bit higher at year-end, the record highs in auto financing amounts that were set in Q4 are the culmination of major challenges to new-vehicle affordability that consumers faced in 2024,” said Jessica Caldwell, Edmunds’ head of insights. “It’s getting more and more difficult for the average shopper to walk into a new-car dealership and leave with a set of keys without feeling like they are forced to create extra room in their budget from some other aspect of life. The one bright spot is that interest rates seem to finally be on a downward trajectory, so buyers are at least getting more car for their buck rather than allocating their payments to interest.”
This reminds me of that video from the one dealership a couple of years back that showed employees there spending upwards of $1,000 a month on new car payments. It was treated as an aberration at the time, and the dealership faced a huge backlash in the media. What’s clear is that it’s not an aberration. While it’s not the average new car loan, it’s more common than it’s ever been.
Not to oversimplify, but it does seem like there are two distinct types of buyers in the market. Many consumers want/need a new car and end up attempting to get a deal. A lot of these people are moving into the compact SUV and subcompact SUV space. Then there are people who want a specific car or truck and are willing to take a huge monthly payment, a longer-term loan, or both.
The average new car loan in the US last quarter was 68.8 months, with a $754 monthly payment at 6.8% APR with $43,113 financed and a down payment of $6,856. Doing a little math and keeping everything the same, that’s more than $1,000 a month for a 48-month loan at the same rate (though, you’d likely get a better interest rate for the shorter term). This is why I say it’s “the new normal,” because the market is continuing to stretch payments.
This isn’t to say there aren’t good deals to be had, but since Trimflation kicked in it’s clear that automakers don’t want to go back to lower pricing unless they have to, and will instead keep ratcheting up incentives. That’s fine if you want a Nissan Rogue, but good deals are going to be harder to find on something like a Range Rover.
As you can see in the graphic above from Cox Automotive, there’s a real split between the popularity of more affordable compacts and more expensive SUVs and trucks when it comes to market share.
What do you do if you want a reasonable car payment? Edmunds has some good advice:
“For longstanding new-car buyers coming back to the market for the first time in years, used purchases and new EV leases are your best bets to keep your monthly payment in line with what you were accustomed to in pre-pandemic times,” said Ivan Drury, Edmunds’ director of insights. “Going down either route presents traditional new-car shoppers with a couple of options: sticking with what you know — buying a used car similar to your current one but with some upgraded features — or embracing the future with an electric vehicle.
Pretty much, yeah.
Kia And Hyundai Set New Records On The Back Of A Lot Of Hybrids
It’s quite amazing how much Kia and Hyundai have grown in the United States, and if there’s any hint for Nissan and Honda on what to do when your country arranges a marriage for you, I guess step one is hiring Jeff Bridges.
My brother-in-law got a hybrid Santa Fe this year to replace his Ford Flex and it rules. I could not argue against the choice in any way, though I was sad to see the Flex go. He was not alone in his purchase, Hyundai reported a record Q4/December/Year, delivering a total of 836,802 vehicles in 2024. The company said it hit new monthly sales records for the Santa Fe HEV (+87%), Tucson HEV (+133%), and IONIQ 5 (+41%). Hybrid vehicle total sales jumped 85%, while total EV sales grew 12%, overall.
Kia came within striking distance of besting Hyundai, with 796,488 units sold in total. The brand didn’t break out hybrid sales, but with similar lineups, my guess is that Kia sold a ton of hybrids.
We’ll have more sales coming in from other automakers this week, so we can see if this trend is isolated to the South Korean automakers.
Rivian Turns It Around, Sort Of
The Rivian R1S and R1T are great vehicles, but like all startup automakers, it’s been a tough transition for Rivian into the new EV paradigm. The company was probably on the way to decent sales and production until an embarrassing mistake led to a supply shortage of critical motor wiring.
Rivian says the issue has been resolved and it’ll get production back, though it’s not clear quite how much production Rivian will need. Last year, the company made 49,476 vehicles, down from the 57,232 vehicles it made in 2023. By comparison, the company did sell 51,579 vehicles, which is slightly up from the 50,122 vehicles it sold in 2023.
In Q3, Rivian lost $39,130 for every truck it built, which is not great. The company has had better news lately, securing a major investment from Volkswagen and a big loan from the Biden Administration.
Rivian stock is up today, so make of that what you will.
Italy Hits A 68-Year-Low For Car Production
Stellantis and Italy aren’t exactly the best of friends right now, though some of that might have to do with the brusque leadership of outgoing exec Carlos Tavares, pictured above.
The country no longer has poor Carlos to kick around anymore, but that doesn’t mean all is suddenly well. Italy’s FIM-CISL union said the company cut manufacturing to just 475,090 vehicles, way down from the 751,384 that were made in Italy in 2023. Overall, production of non-commerical vehicles in Italy was down 46%, to the lowest level since 1956.
FIM-CISL said it would join a protest planned in Brussels by labour organisation IndustriALL Europe on Feb. 5, two weeks before the European Commission presents its “clean industrial deal”.
The union’s leader Ferdinando Uliano said it was important to review EU targets for vehicles’ carbon emissions reduction due to kick in from 2025.
“This is a battle for Europe,” Uliano said, speaking about the crisis facing the European car industry. “Single countries can only lose.”
Don’t worry, Chinese automakers are willing and excited to make up the gap.
What I’m Listening To While Writing TMD
Here’s A Tribe Called Quest on an “Award Tour” with Trugoy the Dove from De La Soul. Never let a statue tell you how nice you are.
The Big Question
What’s the most you would ever pay per month for a new car?
Top image: News 12 Long Island/BMW
Not only do I never want a car payment again, I’m hoping never to buy a newish daily driver again. My 2013 Acura has 54k miles on it, and hopefully nobody will crash into it because it has another 100-150k miles in it. Assuming my driving habits don’t change much, that’s 20-30 more years 😀
The lowest level since 1956 in absolute numbers? Or per capita or something normalized to the addressable market?
If the former, which is what I’m getting from the article, that’s… Staggering, given the domestic population growth and internal expansion since the European union and its international trade deals.
The last car loan I took was $683.00 per month for 60 months. Paid it off and still have the vehicle. She is still running and is about 11yrs old. I will be damned if I pay $1k for a brand new car. I will keep this one running until the model I want is on the pre certified used market. Plus these APRs are insane. I can’t see myself paying over 5% in interest. I just don’t understand how a lot of people are like here take all my money and here is kidney too all to finance a car that losses 5K when it rolls of the dealership lot.
$0. I will never have a car payment again. Been there, done that. I now buy late 90s/ early 00s cars that are reliable, have plentiful/ inexpensive parts, and are easy to work on. This era is the sweet spot where cars have decent “modern” features and also have mechanical simplicity. Some of my recents have been a 2002 Mazda Protege5 and a 1998 Jeep Cherokee XJ. Sure, problems occasionally come up, but they rarely require more than a couple hundred dollars at RockAuto or more than a Saturday afternoon of my time. As a bonus, I often daily drive them for a couple years and then resell them for profit. Oh, and registration and insurance are super low.
Preach!
Coincidentally a 2002 Protege5 was the first car I ever financed, early in college. This was in 2005, and it sat on an Acura dealer’s lot allegedly as someone’s trade-in, amid new RSX’s and TL’s, and had a price of $8,999 written in Lime green on the windshield. A 3 year old car, and mind you, not the bottom of the barrel either, for 9K! damn son, those were the dayyyyyys
A 3 year old car, and mind you, not the bottom of the barrel either, for 9K! damn son, those were the dayyyyyys
Happy days are here again!
https://inlandempire.craigslist.org/cto/d/corona-2022-toyota-mirai-xle/7815178360.html
https://seattle.craigslist.org/see/ctd/d/puyallup-2022-mitsubishi-mirage/7813921699.html
https://oklahomacity.craigslist.org/ctd/d/oklahoma-city-2022-kia-soul-lx-4dr/7813411290.html
(Never mind the first runs on unobtanium, the second is something only a certified cheap bastard can love and the third is KiaBoi bait.)
Anyone foolish enough to buy a Range Rover deserves whatever terrible deal they get.
I’m very happy to be 3 months from no car payment. Our new to us car is used cheap and literally bought for cash and the one newish car is either good for several years, or a source of cash for something more interesting.
While the new used car is a Fiat it did nothing for Italian auto production since North American Fiat 500s are hecho en Mexico.
I mean at $1000 a month, you could drive a terrible old BMW purchased off of marketplace, spend some money every month on fixing it, and still be ahead. (This may be autobiographical)
Or buy a new clapped out bmw every month!
For a while I was kinda doing that, every 3-4 months I’d buy a cheap manual BMW for like $1500 or less. I’d fix em up (I’m a former BMW tech), daily drive them and put about 10k-15k miles on them in a few months, and then sell them on, taking the money and buying the next car. It’s a lot trickier to do that now, even really bad old manual BMW’s are selling for too much money.
$1,000 bucks per month car payment? How are young people going to make it in this economy, with rent and insurance sky high too? I’m old, back in 1978,I was 17 years old. Interest rates were 19% and I worked part time. I was easily able to afford a beautiful 1976 Camaro LT.. I think the payment was around $100 a month for 36 months. For a 2 year old sports coup with 25k miles.
No way could a 17 year old kid, working part time, could afford a similar car today. I worry about what’s happening to young people today.
I was curious about how 1978 dollar amounts compared with today’s, so I ran your number through the CPI inflation calculator on the bureau of labor statistics website. Believe it or not, $100 in September 1978 dollars equals $474 in the dollars of November 2024. I’m not too sure what to think of this news. I guess your rent was WAY cheaper back then! I do know this from personal experience: in 1992, my brother-in-law (as a 17 year old high school senior) bought a base model, zero-option Nissan pickup. The payment was about $100/month. I’m sure that his Dad (who had excellent credit) had the loan in his name in order to get a low interest rate. The CPI calculator says that would be about $224 in November 2024 dollars. That’s cheap!
You’re a rare bird in your generation worrying about how younger people are being crushed. Most of what I’m hearing from older folks is “nobody wants to work anymore” and “when I was 17 I made $4.50 an hour and I didn’t complain” (not realizing that $4.50 back then meant $28 today and kids are getting $7.25-$17 max) and blaming McDonald’s employees’ pay raises for everything.
2004 Cayenne S, 2001 Range Rover 4.6, 1995 BMW 530i. My payments don’t have a comma, but my repair bills do.
You possess profound courage.
…and no money.
I had a $680 payment on a high-trim Mustang GT in 2020 at 3.1% with $10k down… while I could afford it, I can certainly see situations where folks could go to $1k/month. But it’d have to be a special ride and paid for with disposable income.
$1k/month for a plebian daily is ridiculous.
No payment for my own car(s), I’ll just drive cheap beaters forever now.
Our daily driver family rig has to be rust free, mechanically solid and reliable so I’m willing to spend $3-400 per month on something that’s a few years old.
I don’t like owing money on cars so I’m always paying them back a bit sooner.
And this is a sort of personal mission of mine: I’m willing to take a risk on “sketchier” brands as I pretty much refuse to believe that there are truly bad cars anymore. There are no carburetors, no points ignitions, no rebuilds every 60k miles anymore and some really-really good oils and materials.
Anecdotally, our previous daily, a 2015 Jeep WK2 had only one major issue that actually I caused myself by messing up a spark plug change. Other than that self-inflicted problem no issues between 90k and 140k
The 2020 Armada Y62 has also been rock solid so far, zero issues, knock on wood.
Maybe one day I’ll eat my words, but I still prefer a low payment instead of overspending on a more “reputable” brand.
Man, this financing questions bring out the experts…
The last car we bought new was a 2013 Passat TDI, and the monthly payment was about $350/month, which rolled some of the balance on the MAZDASPEED3 loan I had into it, and ended up getting paid off and then some by the Dieselgate settlement. Since then it’s been CPO or used. Our Pacifica has been paid off for a couple years now, and my ’09 G8 was paid off when I traded it for a 2015 GTI a few years back. I don’t mind a car payment, but like not having them and definitely don’t want two – or one in the four-digit range – if I can help it.
I always said no more than 500 a month for any car. but inflation, stupid used car prices (Still) and high interest rates. 750 credit on 72 months on a new car nets you 8.6 percent in my neck of the woods. But with so many landmine cars on the market, you almost have to buy something newish to hope to at least outlast the 5 year 60k mile powertrain warranty. basic ass half ton trucks start above 35K. and 50K is exceedingly normal these days. 50K is right at the 1k per month payment in the scenario above.
So here I am with a $355/mo payment for a 36-month lease on a 2024 Subaru Solterra EV. Paid $1000 for registration and such at signing. I have the California Clean Air Vehicle permit/sticker so I’m saving about $150/month in tolls and can drive solo in the carpool lane. (actually all this applies to my wife ‘cuz she’s the driver of that car)
Lease is definitely not the same as purchasing outright. though the diminishing returns on resell value lately along with exceedingly long finance terms, certainly make for a good reason to consider that route.
I understand that a lease is not the same as an outright purchase. However, a heavily subsidized lease on an EV is a good thing for the lessor. The other thing is that the California Clean Air Vehicle permit is only good for a certain number of years. This ultimately means that it makes sense to lease a new EV every 3-4 years rather than own one long term, IF you need the benefits that come with the clean air vehicle permit. Might it be cheaper to buy a used Chevy Bolt EV with a fresh HV battery (thanks to the recall)? Maybe, but you can’t get the clean air vehicle permit on a used EV unless your household income is below a certain value…and I’m above that value. Besides, my wife likes to drive a new car and we can easily afford this lease payment!
Just because other people are doing it, doesn’t mean I have to, but more power to them, I suppose
I wouldn’t even have any car payment if not for my company mandating I buy a new car every 4 years for mileage reimbursement purposes
If i were budgeting $1,000 a month to buy a vehicle, I’d split that payment in half and buy a decent tow rig and a nicer newer boat. Because if you’re going to start drowning in debt, why not get wet in the process? Which brings me to boat loans. If you want insanity, look at those loan terms! Several dealers and distributors advertise 12-year loans!
Decent tow rigs are 40K minimum these days unless you are handy and willing to get an older high mile thing to use.
Bust Out Another Thousand
Why not rent a boat when you want it?
It’s just mind boggling to me that $1,000 car payments are so prominent these days. And I’d bet you that a lot of these folks have more than one car payment, that’s an exorbitant amount of money to be tying up each month going towards a depreciating asset.
Maybe I’m just overly conservative, but I have a hard time stomaching more than $450/month for a car payment, on no more than a 72 month loan (ideally, no more than 60). I also only like to have one payment at a time. My wife’s lease will be up soon and my daily is approaching 10 years and 185K miles, so we will be in the market soon. These days, for us that means going CPO rather than new for the vehicles we want and putting a significant amount down. So be it. We could technically “afford” two $700+/month car payments with our two good incomes, but that would drive me nuts every month we’d be paying bills. So here’s to buying her a new to us CPO car this year and hoping that my beater makes it through another few years before I have to buy another.
the tough part is the repair place are really sticking it to people these days too. I know my mom is the proverbial little old lady and the jerks at Firestone prey on them, but really, 500 bucks to replace two rear pads and swap rotors. the sum total of the parts costing 69 bucks from raybestos. yeah I will spend an hour topes on her car swapping these parts. that is an insane quote.
Meh, I’ve had $1000+ car payments a few times. That’s what it takes to pay off a $40-50K car in a reasonable amount of time, even with a substantial downpayment. My definition of reasonable time is before the factory warranty expires. I actually paid off my 328! wagon in a bit over three years.
Ultimately, a new car (or even just a *different* car) is a want, not a need, the vast majority of the time. Even my most recent new car purchase, a KIA Soul for my sainted mother a couple years ago, was a want. I wanted to not have to DEAL with my mother when the aging Volvo V70 she drove decided to have a dilemma. It would have been far cheaper to just keep fixing the Volvo, and I could have done that indefinitely. But not getting those phone calls was worth the $20K. And now she is KIA’s problem (may God have mercy on their Soul) for 5-10 years depending on what breaks. At which point I doubt she will still be driving.
I just got a used 2023 Miata RF yesterday and only put 8k down for now so my payments are going to be like 550 a month which is crazy to me but come tax return and bonus time that is all going towards paying off the loan quicker. Even with my credit scores all being 800+ my interest was 7% so yeah not great times for buying used unless CPO and no interest/low interest.
Side note stupid dealer when I was getting all the paper work signed the financed guy kept pushing on a extended warranty when I had already told them no multiple times. Should have just walked at that point but they kept pushing and made up some bs saying my payments would be the same without emphasizing it was adding 3.3k on ( they got a really angry call from my fiance later who had left the dealer to go to an antique store since they were taking forever). Wouldn’t have expected this to happen at a well rated Toyota dealer but nope it did so note to everyone do a quick read of the low star ratings on a dealer they might point out some of this bs dealer try to add. Screw dealers. End rant haha
There’s no real ceiling to how much I would pay for a car loan, but only because I’m in the fortunate financial situation of probably never needing to finance a car purchase again. If I did, it would be because I got a stupid low interest rate and was using that to invest the money in hopes of making more than the loan costs.
That said, my largest car payment to date was about $450 and that felt crazy expensive to me, given that my first car was $135/month. Heck, my mortgage payment (on an appreciating asset) isn’t $1000 right now.
I actually smiled when I saw that picture of Carlos Tavares (pictured above). I’m conditioned and I’m not even mad about it.
Should be required with each new morning dump.
When I was a finance manager at a Chevrolet store recently, the amount of payments that left my office with a comma in them was fucking STAGGERING. And these weren’t for doctors or lawyers. These are regular ass people with regular ass jobs with halfway decent credit that are just buying entirely more car than they need. But as the old car business adage goes, “If a bank says you can afford it, you can afford it.”
I hate what I do sometimes.
Maybe Italy and Stellantis can get together and change the world: offer a new Fiat Panda 4×4 with a basic engine/hybrid for dirt cheap.
I’d totally buy one with a 6MT.
I’d rather have a Suzuki Jimny, personally, but I get that you’re talking about the low Italian production thing.
I think either of those would catch on like crazy in the US. Sell ’em cash at Tractor supply.
With the cost of mortgages/rent where I am, I don’t understand how anyone has $1K a month available for a car. Even then, a fraction of that money would be better spent on a transit pass and really nice shoes. People should really be pissed off that they ‘have to’ own a car to participate in society. This is a total scam.
My car payment plus mortgage are cheaper than a mortgage close enough to my job to not need a car. Welcome to rural America
That works only when the wages in your area support it. Many people end up living in expensive locals because that’s where the earning power is. Then there’s the question of how much (presumably valuable to you) time to you have to spend to get to work or fetching things you need. Trade offs of car-centric urban planning…
Unfortunately most Americans have no idea what a transit pass is and can’t fathom a life without a car. I’m not a city guy anymore, but my experience in places with working mass transit was truly liberating.
LOL, yep…I consider transit passes to be one of the luxuries of going on vacation. Ironically, anywhere with good/clean/safe mass transit usually means you’re on a pretty nice vacation.
On the plus side, WFH for 9 years allowed us to basically pare down to a single car for 95% of all miles driven. Mandatory RTO (even though I was never “in TO” to begin with) means I’ll have to buy something soon.
Even just having safe sidewalks so you don’t have to drive 50 yards to get something!
Where I live, people shoot each other on the bus or shoot into the bus from outside…
What a country!
Oakland, CA?
St. Louis
Because shockingly, lots of people make LOTS of money, especially once they reach post-children advancing middle age. This is not intended as a brag, but reality is if I had a $1000 car payment I would still be banking $6000/mo *after* paying all my bills for summer and winter homes most months. But when I was a kid fresh out of college, I had to live with roommates and I didn’t have two nickels to rub together. My first few years out of school I made so little money I qualified for the earned income credit as a single dude, and probably could have gotten food stamps if I had bothered. That phase of life lasted quite a long time and it felt like I would never get ahead. I did.
You don’t HAVE to own a car – you can always move somewhere that you don’t need one. But don’t complain that you then have to live in a fifth-floor walkup apartment with astronomical rent. With roommates. And/or spend an eternity daily on public transport. I’ve also lived in a European city with GREAT public transit – still sucks to be dependent on it to get anywhere.
I found a loophole with my electric velomobile. I can take a 200 mile ride on about $0.25 of electricity. Ebikes aren’t as cheap to ride, but close enough. I don’t pay for state taxes, insurance, registration, stickers, ect. I also get reimbursed the IRS rate per mile by my employer when using it for work.
I’m very much in your camp when it comes to my personal vehicle choices, but they really are not for everyone. Either physical or climate limitations (or even their own safety on roads) make e-bikes and various light recumbent vehicles an enthusiast niche. The real problem is how our cities and communities are designed and how poorly communal transit options are built, maintained and run.
I’ve never had a payment over $450, and I’m looking right now and most the vehicles I’m looking at would still cost me under $250-350/mo.