You’re Right, It Is Very Expensive to Finance a Car These Days

Average new-car prices aren’t getting any more reasonable, and if you’re someone who finances their vehicle, you’re probably wondering where all the money’s going.
The average APR for new vehicles financed in March was 7 percent, helping create a market where the average payment for a new car is, gulp, $730.That’s bad, but the number of people paying over $1000 is also on the rise. In Wyoming, more than 25 percent of car shoppers who finance have payments that high. Sorry, truck shoppers.

The average price of a new car in the U.S. has been climbing, again, and at least one Toyota executive thinks it could hit $50,000 later this year. If we’re paying more for our cars, it logically follows that our monthly payments are increasing as well, especially with interest rates as high as they are. Right on cue, Edmunds has announced that the average annual percentage rate (APR) for new vehicles was at 7 percent in March, the highest level since early 2008. The average monthly payment for a new car is now $730, up almost $80 from a year ago.

Interest Rates Climbing to 7 Percent and Higher

The average APR is under 6 percent in only two states—Minnesota and South Dakota—and is above 7 percent in 16 mostly Southern states. The national average was under 6 percent in September and has been climbing each month since then. The Federal Reserve sets the rate at which banks can borrow money, which then influences the rate the rest of us pay when we, say, finance a car. The Fed has been raising interest rates recently as it attempts to keep inflation from growing too rapidly and has raised the rate by almost 5 percent over the past year.

Higher APRs and higher prices, along with the length of the loan, affect the total price and just how much people are paying each month. In some cases, it’s a lot. In January, Edmunds noted that around 15 percent of people who financed a new car did so with payments over $1000. As of March 2023, the number has grown to almost 17 percent, representing a continued increase from the 10.5 percent who were paying four figures monthly for their car a year ago. These high payments are likely one reason why more Americans are falling behind on their car payments in 2023 than at any time since 2009, according to Bloomberg.

Wyoming Has the Most $1000+ Car Payments

Two states stand out as “winners” in the race to pay $1000 or more a month for your car: Texas and Wyoming. Almost 21 percent of new-car financers are in the four-figure club, but Wyoming has the honor of topping the list. Vehicles are “ridiculously more expensive” there these days than before, according to Cowboy State Daily, and we can see that in the fact that a whopping 25.7 percent of people agreed to pay over $1000 a month for their vehicles. Edmunds said the high prices in Wyoming and Texas are “due to the high volume of large truck purchases in both states.”

While $1000-a-month payments are rare in the used-car world, the cost to finance is even higher than for new cars, Edmunds notes. The average APR to borrow money for a gently loved car or truck was over 11 percent last month, up from just over 9 percent in September. It’s pricey out there.

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Contributing Editor

Sebastian Blanco has been writing about electric vehicles, hybrids, and hydrogen cars since 2006. His articles and car reviews have appeared in the New York Times, Automotive News, Reuters, SAE, Autoblog, InsideEVs, Trucks.com, Car Talk, and other outlets. His first green-car media event was the launch of the Tesla Roadster, and since then he has been tracking the shift away from gasoline-powered vehicles and discovering the new technology’s importance not just for the auto industry, but for the world as a whole. Throw in the recent shift to autonomous vehicles, and there are more interesting changes happening now than most people can wrap their heads around. You can find him on Twitter or, on good days, behind the wheel of a new EV.