Edmunds experts share car buying tips to save money ahead of Black Friday weekend

SANTA MONICA, Calif., November 18, 2022 /PRNewswire/ — New and used car prices could drop slightly ahead of the holiday season, but car-buying experts at Edmunds warn that rising interest rates should cause consumers to re-evaluate their buying habits before quickly embarking on a car loan. According to Edmunds data:

  • Average transaction prices for new and used vehicles are declining, but remain high year over year. The average transaction price (ATP) for a new vehicle has fallen to $46,991 in October 2022 compared to a peak of $47,222 in June 2022but still represents a 3.1% year-over-year increase from October 2021. The ATP of a used vehicle fell to $30,045 in October 2022 compared to a peak of $31,095 in April 2022but still represents a 4.7% year-over-year increase from October 2021.
  • Interest rates for new and used vehicles are skyrocketing. The average annual percentage rate (APR) of a financed new vehicle purchase increased to 6.3% in October 2022 against 4.2% in October 2021and is the highest new vehicle APR since April 2019. The average APR for buying a used vehicle jumped to 9.6% in October 2022 compared to 7.4% in October 2021which is the highest since February 2010.
  • More and more car buyers are opting for longer car loan terms to make monthly payments more acceptable. Edmunds data shows that 34% of financed new car purchases had an average loan term of more than 73 months in October 2022compared to 27% in October 2017.

“Car buyers might enter Black Friday weekend knowing that high prices and limited inventory will make deals harder to come by, but they might not fully understand how essential it is to prepare. their purchase and how they will finance it, before going to the dealership,” said Jessica Caldwell, executive director of Edmunds Ideas. “The last time interest rates were this high, consumers could at least count on lower vehicle prices and a wider range of inventory to cushion the blow. That’s just not the case on this market.”

To help car shoppers ahead of the holidays, Edmunds experts have compiled a list of insider tips to help consumers avoid key pitfalls and maximize savings:

  • Start your buying process by getting pre-approved for financing. Be sure to seek approval from more than one lender to see what you qualify for. With a pre-approved loan offer in hand, you can quickly decide if the financing rate offered by the car dealership is the best deal.
  • Look for promotional APR offers in your area. More and more automakers are offering to subsidize car loans with lower interest rates – the caveat is that most of these offers require consumers to agree to shorter loan terms of 36 or 48 months. Use your pre-approved offer to compare rates and determine what works best for you.
  • Think beyond your monthly payment. It’s easy to be narrow-minded when it comes to monthly payments, but budgeting accordingly and being flexible with loan terms means you can take advantage of promotional APR offers – which means paying less interest over the term. of your loan. Edmunds analysts calculated how much extra interest a consumer could expect to pay on a $40,000 car loan over 72 months at 6.9% APR against 48 months at 1.9% APR. They note that going from the longer, higher-rate loan to the shorter, lower-rate loan would increase the monthly payment by $680 at $866 but would save a consumer $7,392 in interest paid. Below is a chart that Edmunds analysts have put together that outlines these different scenarios.
  • Consider putting more money aside. If you have additional cash, it may be worth putting a larger sum to reduce the amount of your monthly payments.
  • Consider the interest saved as an opportunity to get into a nicer vehicle. If you shop your rate correctly, with a favorable APR, you could buy a more expensive vehicle but pay less over the life of the loan. Edmunds analysts have calculated that taking advantage of a 1.9% loan for 48 months on a $45,000 purchase would cost the consumer a total of $46,767who only understands $1,767 in the interest. Compare that to funding a $40,000 purchase at 6.9% for 72 months, for a total cost of $48,963 due to $8,963 in the interest.

“Finance the purchase of a car is tricky in today’s market, but if you play your cards right, financing $45,000 could cost you less over time than financing $40,000 over a longer period,” said Ivan Drury, director of Edmunds ideas. “With many automakers offering highly targeted incentive programs, you may find that promotional offers will save you so much on the total interest paid that it might be worth switching brands or models. “

Rising
Finance

Term

APR

Monthly
Payment

Total interest
Paid

Total amount
Funded and
Interest paid

$40,000

72

0.0%

$556

$0

$40,000

$40,000

72

1.0%

$573

$1,229

$41,229

$40,000

72

2.0%

$590

$2,481

$42,481

$40,000

72

3.0%

$608

$3,758

$43,758

$40,000

72

4.0%

$626

$5,058

$45,058

$40,000

72

5.0%

$644

$6,382

$46,382

$40,000

72

6.0%

$663

$7,730

$47,730

$40,000

72

7.0%

$682

$9,101

$49,101

$40,000

72

8.0%

$701

$10,496

$50,496

$40,000

72

9.0%

$721

$11,914

$51,914

$40,000

72

10.0%

$741

$13,354

$53,354

Rising
Finance

Term

APR

Monthly
Payment

Total interest
Paid

Total amount
Funded and
Interest paid

$40,000

72

6.9%

$680

$8,963

$48,963

$45,000

48

1.9%

$974

$1,767

$46,767

Edmunds guides online car buyers from research to purchase. With in-depth reviews of every new vehicle, buying advice from an in-house team of experts, and a wealth of consumer and automotive market information, Edmunds helps millions of buyers select , price and buy a car with confidence. Rated one of America’s Best Workplaces by Fortune, Great Place to Work and Built In, Edmunds is based in Santa Monica, California. follow us on Twitter, Facebook and instagram.

CONTACT:
Talia James Armand
Director, PR and Communications
[email protected]
310-309-4900
http://edmunds.com/about/press

SOURCE Edmunds

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