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New cars purchased in June in the U.S. carried a record average monthly payment of $686, according to car sales website Edmunds.com.
The figure is 4 percent higher than January’s average and 13 percent more than a year earlier.
Another record: 12.7 percent of June buyers signed up for car payments of at least $1,000 a month.
The proportion was 7 percent a year ago, 5 percent in June 2019, and 2 percent in June 2010.
The average down payment on a new car was $6,333 last month, 27 percent more than a year previous.
The average interest rate on a new-car loan was 5.2 percent, compared to 4.4 percent in February, the month before the U.S. Federal Reserve began raising interest rates.
Loans to buy cars numbered 5 percent fewer in this year’s first quarter than during the same period in 2021, falling to 6.3 million, according to credit bureau Equifax.
However, the average loan was bigger.
Those new loans totaled almost $190 billion during the quarter, setting a record and growing by 11 percent over the figure in last year’s first quarter.
In the past, car loans lasted for five years.
Now, with higher prices, loans can extend for six or seven years, with a “small but growing share of buyers” opting for loans exceeding seven years, The Wall Street Journal said.
The longer the loan, the lower the monthly payment but the more the buyer pays in interest over the life of the loan.
June’s average payment for a used car also set a record at $554, 12 percent above the average in June last year.
Delinquencies on car payments remain low, the WSJ reported, indicating American households are still able to afford higher payments and buy more expensive cars, trucks, and SUVs.
“It’s a go-big-or-go-home attitude when it comes to car buying right now,” Ivan Drury, a senior manager at Edmunds, told the WSJ.
TRENDPOST: It also is “a go-big-or-go-home attitude” for car loans and payments.
Higher average down payments and monthly payments for new cars indicate that most new cars are being bought by higher-income earners. With inflation still outpacing wage growth, fewer modest- and middle-income earners can afford to buy new, no matter how good their credit ratings might be.
As car prices and interest rates both rise, the trend indicates that the U.S. market for new cars will shrink.
As that happens, the loss of jobs and economic activity will ripple throughout the economy.
TREND FORECAST: Now is the time for billionaire investors or OnTrendpreneur® auto companies to build a simple non-tech, roll down windows, put down the top by hand basic car to sell the growing lower class who cannot afford the over-tech autos of today.