Part of the rise in monthly payments can be explained by steadily increasing vehicle prices, but higher interest rates are also to blame. The average annual percentage rate (APR) jumped to 6.5% in Q4 2022, up from 4.1% one year ago. That’s a sizable increase from just last quarter when the average was 5.7% in Q3 2022.
To offset the higher interest rates, Edmunds says consumers are putting down larger down payments. The average new car down payment went from $5,921 in 2021 to $6,780 in 2022. This number increased from $3,552 to $3,921 for used cars. While some buyers can afford to put more down upfront, others are trading in negative equity and starting off their new loan upside down. 17.4% traded in their vehicle with negative equity, up from 14.9% in 2021.