Why Are Auto Loan Rates Rising?
Auto loan rates are rising, making it harder than ever to purchase and keep a vehicle.
Written by Alexandra Maloney
Reviewed by Serena Aburahma
The automotive world has suffered from supply chain issues for the last two years since the coronavirus pandemic hit, causing car prices to skyrocket. Recently, trends have shown that car prices aren’t the only thing rising in the automotive world, but
auto loans
are, too. We’re going over why this is happening, how long it’s expected, and how you can help mitigate the expense with
Jerry
.What’s causing auto loan rates to rise?
Simply put, auto loan rates are rising because the supply of vehicles is low, and demand for vehicles is still relatively high. The Federal Reserve continues to increase interest rates on most things in order to diminish the demand for them and stabilize the economy.
The shrinking supply of cars is caused largely by supply chain disruptions that resulted from the coronavirus pandemic. The supply chain issues started with a microchip shortage for new cars.
Microchips, which are an essential part of a car’s technology needed to function, might not be available in large quantities until 2023. On top of that, it’s difficult and costly to get replacement parts for cars.
Unfortunately, there’s no clear timeline for the end of auto loan rates rising. Instead, it will likely depend on the state of the overall economy and the Federal Reserve’s manipulation of interest rates at a larger level.
But, when automotive supply chain issues begin to subside, hopefully by 2023, it should help bring auto loan rates down.
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Auto Loans: By the numbers
Annual Percentage Rates (APRs) for cars are at the highest they have been since 2019. According to
Axios
reporting, the average annual percentage rate on a new vehicle loan rose to 5.9% in September from 4.1% last December. With that rate, the average monthly payment for a new car skyrocketed to $703.
Rates for used cars are even worse, as the average for a used car is 9.2%. With a combination of new and used car loans, Axios reports that 14% of car buyers committed to paying $1,000 or more a month on their car loan in Q3 of 2022.
Compare that to the 8.3% who committed to paying the same amount in 2021, and it’s obvious how rapidly auto loans have increased and how that’s impacting many American wallets.
Save with Jerry
For the average American driver, auto loan rates are out of our hands. Not to mention,
gas prices have been steadily increasing
in the United States, too. All this to say, it’s expensive to be a driver right now. Luckily, Jerry can help you save and make things a little bit less expensive in the driving world overall. Jerry acts as your own, pocket-sized insurance broker and helps you find and compare all car insurance rates available to you.
The process is quick, easy, and only requires your basic information. Although you can’t change auto loan rates or gas prices, you can change your car insurance to ensure you’re paying the lowest amount possible. Don’t wait, start using Jerry to save today!
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