Both average interest rates and amount financed were up in the first quarter of 2018 for new vehicles, according to Edmunds data.
The average interest rate for a new-vehicle loan in the first quarter of 2018 was 5.7%, according to Edmunds, up from the same time in 2013, when new-vehicle interest rates averaged 4.4%.
Alongside rising interest rates, average amounts financed have also climbed. The average amount financed for a new car through the first quarter of 2018 was $31,020, compared to $26,533 in 2013. Interest rates for consumers with subprime credit can reach even higher can, on average, be twice the amount of those with good credit.
This combination of rising interest rates and transaction prices has the potential to move consumers away from new vehicles and toward the used sides, as consumers attempt to minimize their vehicle expenses.
Used vehicles, according to Edmunds, can provide consumers with a segment that sees little fluctuation in interest rates.
“Used-car interest rates, while typically higher than new-car rates have remained relatively stable over the past five years. And since a used car is generally less expensive than a new one, you’re more likely to get financed and still have a lower monthly payment,” according to Edmunds.
Looking at sales data from 2017 shows that there has been an influx of consumers choosing used vehicles over new vehicles.
In 2017, the auto industry sold 17.2 million new vehicles, 1.8% less than in 2016, marking the first time in seven years that new-vehicle sales had declined. Meanwhile, used vehicle sales reached 39.2 million in 2017, which represented a 1.6% year-over-year rise.