- It's more expensive than ever to buy a new car as prices and interest interest rates continue to go up.
- Average prices are just off the record highs, but rising borrowing costs mean the total expense is more.
- In addition, fewer car buyers are getting deals, while more are paying above sticker price.
The average monthly car payment for Americans hit a record $712 in June, according to Cox Automotive research, further worsening the affordability of new cars for buyers.
Take Johnny Navarro, for instance, who told NPR that he was stunned when car shopping to see that monthly payments had doubled from what he saw just a few years ago.
"To see it jump from like $300 to $600 for a Corolla or Civic was like, I should be driving like a Mustang for that much money, you know?" Navarro said.
Now, instead of monthly payments under $400, Navarro is shelling out $580 — and that's before gas and parking in Los Angeles, NPR reported.
The run-up in car prices has been well-documented, not to mention a key driver in the headline inflation numbers that have policymakers and ordinary Americans alike watching the metric closely.
New and used vehicle prices have begun leveling off, but Cox Automotive research manager Rebecca Rydzewski says they could remain high for a while longer.
"No one should expect price drops, as tight supplies in the new market will hold prices at an elevated level into 2023," Rydzewski said.
The average new car sold for $47,148 in May, which is just below the Kelly Blue Book record high in December, but there's another factor driving up the cost of monthly payments: interest rates.
Six months ago, borrowing costs were still around historic low territory and have since seen sharp hikes as the US Federal Reserve tries to do what it can to reign in the highest inflation seen in over 40 years.
Taken together, high prices and rising rates have pushed the average monthly payment to more than $700 for the first time, according to Cox Automotive's calculations.
Higher monthly payments could also contribute to an ongoing trend of longer loan maturities as buyers take more time to pay their larger principal and interest totals.
The $712 car payment joins several other threshold figures like $5 gas and $400,000 home prices that are having a jarring effect on public perception of inflation.