Car buyers put more down, finance more for longer

Edmunds.com found that as interest rates climb and buyers stretch to afford more expensive cars, they are putting more money down and financing for longer periods of time.

The amount of money car buyers put down to buy a new vehicle was up 6.5 percent in May to an average of $3,801 — an increase of $233 from a year ago, and $504 from five years ago. Down payments were up slightly on the used-vehicle side as well; used-vehicle buyers put down an additional $93 on average in May, an increase of 3.8 percent compared to May of last year.

“Buyers want pricier cars with more bells and whistles, leading to the troubling trend of trading longer loan terms for lower monthly payments,” said Edmunds Executive Director of Industry Analysis Jessica Caldwell. “But now that interest rates are also on the rise, something has to give. In our increasing credit-based culture where consumers are willing to finance everything from cellphones to vacations, more money up front shows car buyers aren’t completely sacrificing practicality in order to get the cars they really want.”

The Edmunds.com analysis found that while the average loan term, monthly payment and amount financed on new vehicles have grown steadily over the past five years, each was only up about 1 percent in May compared to last year. This trend is also mirrored on the used side, with all three metrics showing slight dips in May.

Sales of hybrids and EVs reached their highest levels of the year in May with over 3% of the market.

Meanwhile  Kelley Blue Book reported the estimated average transaction price (ATP) for light vehicles in the United States was $33,261 in May 2017.  New-car prices have increased by $847 (up 2.6 percent) from May 2016, while falling $266 (down 0.8 percent) from last month.

Ford Motor Company was up 5 percent in May 2017, boosted by the F-Series which rose 3 percent.  The refreshed Fusion also saw one of the strongest gains in the weakening mid-size car segment at 3 percent. Meanwhile, the Lincoln brand was flat, although the MKC crossover fell 4 percent.

Additionally, Volkswagen Group’s average transaction prices grew nearly 4 percent, as the Volkswagen brand climbed 5 percent, in part due to the resumed sale of model-year 2015 diesel vehicles. The Audi brand was flat, though the redesigned A4 allroad soared 9 percent.