New Car Costs Hit Record Levels as Shoppers Grapple With Severe Sticker Shock

New-Car Costs Keep Climbing

Average monthly payments for new vehicles have surged to $766 as elevated interest rates continue to weigh on auto loans.

Data from Edmunds shows that in October the average transaction price for a new vehicle reached $49,105, a 3.1% increase compared with the same month a year earlier.

Ivan Drury, director of insights at Edmunds, told FOX Business that the latest jump was expected: “This has been something that we’ve all been waiting for, I don’t think anyone was ever expecting the number to go down.” He noted that a higher share of electric vehicles helped push the average up, since EVs typically cost more.

No Going Back to “Cheaper” Cars

Even when EVs are taken out of the equation, Drury said shoppers shouldn’t expect to find many bargains compared with prior years.

“Strip all that away, there’s virtually no vehicle you can buy today that is cheaper than it was from last year, two years ago, five years ago,” he explained.

The typical trade-in going toward a new purchase is now about 5.5 to 6 years old. That means many buyers who last bought a car in 2019 or 2020 are walking into dealerships and facing far higher prices than before — and often real “sticker shock.”

Drury added that someone returning to the showroom after six years, having only visited for service, will likely be stunned to see that the average transaction price is nearly $10,000 more than when they last bought a vehicle.

Payments Rise, Interest Rates Still Painful

Monthly payments on new vehicles sold in October climbed 3.2% from a year earlier, landing at an average of $766.

Interest rates eased marginally, with the average APR on new auto loans dipping from 7% to 6.9% in October. According to Drury, that marks a meaningful downward shift, with average rates slipping below 7% for the first time since last December.

Still, the relief is limited. Many shoppers trading in a six-year-old car likely financed their last purchase at about 4% to 5% interest — so today’s loans will still feel significantly more expensive.

Drury estimated that with an average amount financed of $43,000 over a 72-month term (currently the most common length), buyers will pay around $9,500 in interest alone. “You’re not even paying for the car at that point,” he said. “That’s the privilege to borrow.”

Discounts Return, but Only Offer Modest Relief

Dealers have been increasing incentives in an effort to offset some of the affordability strain, but those discounts only soften the blow slightly.

The average discount offered to buyers was $1,985 in January, peaked for the year at $2,262 in June, and came in at $2,240 in October.

“For dealerships, they are resorting back to providing discounts. They are getting money from automakers to put cash on the hood,” Drury said.

On average, new vehicles are sitting on dealer lots for about 60 days — a level considered acceptable by industry standards. However, he noted that dealers would prefer to turn inventory more quickly: while 60 days is manageable, fewer days on the lot is always better for their bottom line.