Five years ago, there were a dozen models of new cars that sold for less than $20,000. In 2023, there was only one: the spartan Mitsubishi Mirage hatchback, which accounted for about 5,300 of the 7.7 million new vehicles sold in the U.S. in the first half of the year, the Wall Street Journal reported. If you are willing to spend more than $100,000, you can choose from 32 models. For the average American, paying off a new car at current prices demands 42 weeks of income, according to data from Cox Automotive, up from around 33 before the pandemic. Bargains have been hard to come by on the used-car lot as well, where the average vehicle listed for about $27,000 — up more than 30% from prepandemic levels, according to Cox’s data. Higher interest rates have made the situation more difficult for buyers. Today’s average new car loan has a monthly payment north of $750, with an interest rate of 9.5%. For used cars, the average rate is above 13.7%, according to Cox. The average term for loans issued over the past three years is nearly six years, according to data from Experian. Defaults and missed payments on pools of auto loans made in the first half of last year to people with subpar credit are matching or outpacing those issued in 2008, according to an analysis published last week by S&P Global that called the data “ominous.” The squeeze faced by borrowers might soon ratchet tighter, with a payment holiday for student loans set to expire at the end of the month. According to credit-reporting agency TransUnion, more than a third of consumers with student loans took on new auto loans during the pandemic.
