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June 7, 2018 | Average New Vehicle Auto Payment Hits Record High $523 Per Month

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
The average size of a loan for a new car in the U.S. set a record in the first quarter as did the average payment.
  • New vehicle loans averaged $31,455
  • The average monthly payment for a new vehicle hit at record $523/month
  • Consumers are lengthening loan terms, with six years being the most common, to adjust to the higher costs and rising interest rates.
  • Outstanding loan balances reached a record high of $1.108 trillion
  • Loans for used vehicles reached $19,536, also a record

Auto Math

$523 * 12 * 6 = $37,656

That total does not factor in the down payment.

Interest = $37,656 – $31,455 = $6,201.

That’s $1033.50 in interest annually.

Lovely.

At the end of six years, perhaps the car will fetch $5,000 in a trade-in, but everything depends on miles, damage, and of course advancements in self-driving.

Anyone trading the car in after three or four years will be hugely underwater.

The dream of owning a new vehicle is becoming more elusive,” said Melinda Zabritski, senior director of automotive financial solutions at Experian.

Elusive Dream?

Ah, the dream of spending $30,000 to $50,000 on a depreciating asset.

Elusive has not yet arrived, but it will.

Mike “Mish” Shedlock

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June 7th, 2018

Posted In: Mish Talk

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