Record Car Prices Are Pushing American Drivers Deeper Into Debt

The cost of new vehicles in the United States reached a record high of $51,109 per vehicle, according to a recent report by Cox Automotive. This figure, which is based on data from Kelley Blue Book, reflects a 2.1% increase year over year. The average manufacturer's suggested retail price (MSRP) for new cars also rose 2.4% to $52,933.

The primary driver behind these soaring prices is the popularity of larger, more expensive vehicles such as mid-size SUVs and full-size pickup trucks. Edmunds, an automotive research firm, reported that the average new-car monthly payment hit a record $787, up from $777 in Q2 and $756 a year earlier. Similarly, the average used-car monthly payment climbed to $582.

A significant 21.2% of new-car buyers financed their purchases with monthly payments of $1,000 or more, while 25.5% took out loans lasting 84 months or longer, marking a new record. The average amount financed for a new car was $44,664, with an average interest rate of 7%. Despite these record-high payments, consumer demand for new vehicles has not waned.

Instead, buyers are adapting by stretching their loan terms and seeking more competitive financing options. However, nearly 30% of new-car trade-ins are found to be underwater, meaning their value is less than the amount owed on the loan. Despite these challenges, few appear to be deterred from purchasing new vehicles, as they are willing to allocate a larger portion of their household budgets to their automobiles.