Due towards the coronavirus pandemic, many auto manufacturers were instructed to temporarily turn off or scale back production, so new car inventory for that 2022 model year may not be as robust because it could have been. Ongoing supply challenges are most likely a factor in the average price of a new car climbing to $38,723 by September 2022, according to Prizes (KBB), up 2.5% in the same month the year prior.
If you are in the marketplace for a new car, you might be trying to determine how much it'll cost to make sure the acquisition matches your budget. The actual price you pay, though, will depend on the brand name you're looking to buy. If you're financing the car, you will also wish to look into average interest rates, so you'll be able to determine the total cost of your purchase. Here's what you need to know.
Average New Car Price by Vehicle Segment
Depending on the type of vehicle you want to buy, the average price can vary greatly. Listed here are the averages by segment, based on KBB's analysis.
|Average New Car Price by Vehicle Segment
|Entry-level luxury car
|Full-size pickup truck
|High-end luxury car
|Hybrid/alternative energy car
|Luxury compact SUV/crossover
|Luxury full-size SUV/crossover
|Luxury mid-size SUV/crossover
|Luxury subcompact SUV/crossover
|Mid-size pickup truck
Source: Kelley Blue Book
Average New Car Price by Make
You'll also find big price differences in line with the vehicle's manufacturer. Some brands market more budget-friendly models while others are more luxury-focused. Here's how KBB breaks down the average new car price for that top nine manufacturers and their makes.
|Average New Car Price by Make
|American Honda (Acura, Honda)
|Fiat Chrysler Automobiles (Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, RAM)
|Ford Motor Company (Ford, Lincoln)
|General Motors (Buick, Cadillac, Chevrolet, GMC)
|Nissan North America (Nissan, Infiniti)
|Toyota Motor Company (Lexus, Toyota)
|Volkswagen Group (Audi, Volkswagen, Porsche)
Source: Kelley Blue Book
Average Auto Loan Rates by Credit rating
Roughly 86% of new vehicles are financed, based on Experian's State of the Automotive Finance Market report for that second quarter of 2022, compared with just 37% of used vehicles. If you're planning on taking out a car loan to purchase your next vehicle, it's important to understand how much it is going to cost.
Auto loan rates vary by credit rating, therefore it is vital that you know where your credit stands to get a concept of the cost of financing. Overall, the typical rate on a new car loan is 5.15%, according to Experian data. Here's how that breaks down based on credit rating range:
|Average Car loan Rates by Credit Score
|Average Loan Rate
|Super prime (781 to 850)
|Prime (661 to 780)
|Nonprime (601 to 660)
|Subprime (501 to 600)
|Deep subprime (300 to 500)
Keep in mind that some manufacturers offer 0% APR financing on a few of their new models, but you'll typically need stellar credit to be eligible for a one of these promotions.
Regardless of the items your credit score looks like right now, take a moment to obtain your credit prepared to purchase a car by checking your score, reviewing your credit score and addressing potential issues that could make it hard to obtain approved for favorable terms.
Decide if your New Car Is sensible for You
Buying a brand-new car is definitely an exciting prospect, especially if you've only driven used vehicles. However, it's wise to take a few time for you to consider both benefits and drawbacks of the new car before you begin shopping around.
Pros and Cons of a New Car
Driving a brand new car means you'll get accessibility most advanced technology and features. Also, you'll have fewer worries about your car breaking down, and you will have a manufacturer's warranty included if it does. In terms of financing, new cars are usually cheaper than used cars.
That said, new cars depreciate quickly, especially throughout the first year. New cars often shed more pounds than 10% of their value in the first month after they're purchased and most 20% following the newbie of ownership. If you didn't place a lot of money down, you may end up owing more about the loan compared to car is worth (also known as being “underwater” or “upside-down” on the loan); this could cause difficulties if you total the vehicle or recycle for cash it. Also, new cars tend to be more expensive for insure than used ones, although actual rates can vary by brand name.
Pros and Cons of a Used Car
If you're still unsure about obtaining a new car, consider purchasing a used car instead. Used cars are cheaper, meaning a lower monthly payment and less interest with an auto loan.
It's also possible to buy a car or truck that's still in excellent shape, especially if the manufacturer certifies its condition. It's common for dealerships to have an inventory of certified pre-owned vehicles which have undergone an extensive inspection and refurbishment and may even have a limited warranty added.
However, reliability is definitely an problem with some used cars, plus they might not still be taught in manufacturer's warranty. You can purchase an automobile service contract for added reassurance, but the covered services are often limited. Often, you'll end up paying for repairs down the line out of pocket, so it's wise aside some cash to be ready for that.
How to purchase a New Car
If you've done your research and decided that purchasing a new car is the greatest choice for you, here are some tips regarding how to feel the process and maximize your savings.
- Know your budget. Remember, new cars are more expensive than comparable used ones, so you will want to look at your budget to determine which you can afford. Dealers may try to direct your attention around the monthly payment, and get you into a more expensive car by extending the length of loan term. You'll want to consider the sales price and the total price after finance charges, as well as the total amount of interest you'll pay over the course of the borrowed funds. A longer loan term may, actually, lower your monthly payment, but it might cause you to definitely pay thousands more in interest over time if it means paying off the loan for an additional one, two or even 3 years.
- Shop around for auto loans. Dealers can arrange financing, and if you qualify for a 0% APR promotion, that may be the best choice. But it's still a good idea to shop around to have an auto loan prior to you heading towards the dealership. Checking with 3 to 5 lenders, like the financial institution you already bank with, won't provide you with an idea of how much with rates but also potentially provide you with some negotiating power using the lenders the dealership uses. Securing financing by yourself before you go in to the dealer provides you with a hard price limit, which supplies even greater negotiating power.
- Do your research on models. Take some time to research new cars online in your town to know exactly what the costs are and whether some dealers are providing promotions, such as 0% APR financing or rebates. Based on what you could find, doing a little legwork can save you hundreds or even thousands of dollars.
- Negotiate using the dealer. With respect to the situation, there might not be lots of wiggle room within the price of a new car, however it doesn't hurt to test. You can potentially gain some leverage by visiting the casino dealer at the end of the month or quarter when salespeople are scrambling to meet sales quotas. Doing all of your research prior to you heading towards the dealership will also assist you to because you will have offers from other dealers available to compare.
If you are in a time crunch, you will possibly not possess a great deal of time to undergo these steps, but doing a minimum of a bit of each could make a difference in your costs. Ideally, you'll start shopping for a new car whenever you don't necessarily need one, so you can walk away from deals more easily and wait for the correct one.
Maintain A good credit score After Your New Car Purchase
Getting your credit ready for a vehicle purchase is an important method to improve your likelihood of getting a low interest rate. Once you close the offer, though, continue reversing your credit damage or keeping it up if it's already in excellent shape.
Experian's credit monitoring tool can help you remain on top of your credit by giving free access to your FICO® Score☉ run by Experian data and your Experian credit history. You'll also get real-time updates when information is put into your credit report, including new accounts, credit inquiries and new personal information.
If your credit still needs some work, monitoring and dealing to enhance your score may give you an opportunity to refinance your car loan in the future. It can also help set you up for better financing in the future. And if your credit profile has already been in good standing, monitoring it can benefit you keep it that way.