Car prices hitting record highs
In this DML Report…
The average transaction price for a new vehicle reached $49,105 in October, marking a 3.1% increase from the previous year and setting a historic high. This rise coincided with a higher share of electric vehicles (EVs) being sold, which are generally more expensive and contributed to pushing the overall average upward. Average monthly payments on new vehicles sold in October stood at $766, up 3.2% year-over-year, while the average annual percentage rate (APR) on new auto loans declined slightly to 6.9% from 7% the prior year. Virtually no new vehicle model is cheaper today than it was one, two, or five years ago, according to Ivan Drury, director of insights at Edmunds.
Buyers trading in vehicles often face significant sticker shock, as the average age of trade-ins ranges from 5.5 to 6 years, and transaction prices have increased by nearly $10,000 over that period for many consumers returning to dealerships. The average amount financed for new vehicles is $43,000, with 72 months being the most common loan term. Over the life of such a loan, borrowers pay an average of $9,500 in interest alone, representing the cost of borrowing rather than the vehicle itself.
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Dealerships are offering discounts to move inventory, with an average discount of $2,240 in October and a year-to-date high of $2,262 in June, supported by automaker incentives. The average vehicle now sits on dealer lots for about 60 days, which is within industry standards but not optimal, as shorter times are preferable for dealers.