Ever feel like there are no brakes on this ride? Well, JD Power and Associates is pretty much confirming that. Even though the world dealt with a global health crisis in 2020, car sales continued, and prices kept going up. In a recent report, the firm said that those that are car shopping should expect to pay a higher average price for a new vehicle. In short, no brakes have been applied to increasing transaction prices.
Increasing sales prices lead to a record high
The higher sales numbers are to be expected. The price of a car in 1980 was never expected to stay at 1980s prices as it marched through time. But, the 2020 values are still eye-opening. According to the JD Power and Associates LMC Automotive December report, the average price of a new car sale has surpassed $38,000 for the first time. The actual value is $38,077, and 79 percent were trucks or SUVs.
Breaking through the $38,000 barrier was going to happen eventually. What is surprising, however, is that it happened in 2020. According to the report, the average price jumped up 9 percent over last year. But, most surprising, is that 2020’s average sales figure is 20 percent higher than 2015’s numbers. That’s just five years ago!
Monthly payment values and loan terms grow in conjunction with sales values
The JD Power and Associates LMC Automotive report has other statistics that are pretty telling about the larger picture within the automotive sales arena. Along with the average new car transaction price going up, the average monthly payment has also risen. It currently stands at an average of $610 monthly. Along with the payment, the average loan term is now 69 months.
Overall, the rising prices have a domino effect. Generally speaking, the higher the price of the car, the higher the monthly payment or the longer the term. The longer the term, the less the vehicle will be worth at trade-in and the more interest has been paid on the vehicle. So, the quickly rising prices has many wondering what they can do to lower their monthly payments on a vehicle purchase.
The path to lower payments
A high monthly payment can put a lot of stress on a person’s shoulders. Thankfully, there are a few things that can be done to limit or lower one’s monthly payments on a car. Here are a few of those strategies.
Assuming the term stays the same, a higher downpayment, if possible, is a good way to lower monthly payments on a vehicle. Basically, one is financing less if a higher down payment at the time of purchase.
The next way to lower monthly payments is to get a less expensive vehicle. Again, generally speaking, the lower the amount being financed, the lower the monthly payment will be. A vehicle that is more in keeping with one’s budget may be less desirable. However, it can save one from feeling pinched in a sales environment. It is a matter of peace of mind.
Finally, refinancing an existing loan is possible with some lending institutions. Banks and credit unions will often have the option to refinance available just so that they can keep customers. It is like starting a new loan, but the monthly payment is based on the remaining amount of the vehicle. However, refinancing becomes more difficult if the vehicle is worth less than the value still owed. So, don’t be afraid to ask many questions if pursuing this direction.
The cost of living is not keeping up
The sale of a new car at $38,077 is no joking matter. For many people, that is an entire year’s salary. Not surprisingly, that value is likely to continue rising. Given that the last five years indicate a 20 percent increase in new car sales values and the cost of living for 2020 is only up 1.3 percent, consumers are quickly finding new cars harder and harder to reach for, and there does not seem to be any brakes on that trend at the moment.