Car buyers are facing minimal relief as interest rates and vehicle prices continue to rise. The latest data from automotive information provider Edmunds reveals a concerning trend – a record 17.5% of new car buyers in the third quarter are now paying over $1,000 per month for their vehicles. This marks a significant increase from three years ago when less than 7% of buyers were willing to spend that much.

The automotive financing landscape has witnessed considerable changes over the past three years. In 2019, the average interest rate for financing a new car was around 4.6%, whereas it has now surged to approximately 7.4%. Concurrently, the average transaction price for new cars has risen from $39,000 to $48,000 during the same period.

While these figures suggest that monthly car payments should have increased by about 37%, the actual rise has been just under 30%. This discrepancy underscores how car buyers are adapting to manage their monthly payments. Notably, the average down payment on a new car has nearly doubled, increasing from just over $4,000 to just under $8,000. This additional $4,000 has roughly reduced the average monthly payment by $60.

As a result, buyers today are financing about 83% of a new car’s value, compared to around 89% three years ago. Notably, there hasn't been a significant shift towards longer loan terms. The average new car loan term is currently 68.3 months, slightly down from 70 months three years ago. Opting for shorter loan terms translates to higher monthly payments, and the 1.7-month reduction has added approximately $20 per month to car payments.