Auto Loan Interest Rates Hit Highest Level in Eight Years in February, According to Edmunds Analysis

SANTA MONICA, Calif., March 1, 2018 /PRNewswire/ -- Interest rates on new vehicle loans are expected to soar to their highest point in eight years in February, according to the analysts at Edmunds, the leading car shopping and information platform. The annual percentage rate (APR) on new financed vehicles averaged 5.2 percent in February, compared to 4.9 percent in 2017 and 4.4 percent five years ago. Edmunds experts point to an expected decrease in the number of loans in the 2 to 3 percent APR bracket and an expected increase in loans in the 4 to 7 percent range as the driving force behind this rise in the average.

Because this shift is happening in the mid-range of APRs, it means car buyers who qualify can still find deals, and the market isn't facing a flood of subprime buyers. The percentage of loans with interest rates between 0 and 2 percent is expected to remain steady at 22 percent in February, compared to 21 percent in February 2017. On the opposite end, the number of loans with interest rates above 7 percent is also expected to remain steady at 19 percent in February, compared to 18 percent in February 2017.

"We're starting to see a trickle-down effect from the rate increases happening at the federal level," said Jessica Caldwell, Edmunds executive director of industry analysis. "The Fed rate hikes directly affect unsubsidized loan rates offered by third-party lending institutions such as credit unions and banks, and as a result we're seeing loans that were formerly between 2 and 3 percent being pushed up into higher APR brackets. Additionally, dealerships can match these independent loan rates brought in by shoppers."

Edmunds analysts say that higher interest rates and near-record high lease returns could also be a contributing factor toward lease penetration levels hitting an all-time high of 33.5 percent in February.

"Car shoppers tend to have tunnel vision when it comes to their monthly payments," said Caldwell. "As average transaction prices and interest rates rise, we're likely going to see more consumers explore the option of leasing. In some cases this is a result of consumers simply seeking a way to cut down monthly payments, but for many others, this the only option available when they discover that they can no longer afford the costs of a new vehicle."

More insight into recent auto industry trends can be found in the Edmunds Industry Center at http://www.edmunds.com/industry-center/.

About Edmunds
Edmunds is the leading car information and shopping platform, helping millions of visitors each month find their perfect car. With products such as Edmunds Your Price, Your Lease and Used+, shoppers can buy smarter with instant, upfront prices for cars and trucks currently for sale at more than 13,000 dealer franchises across the U.S. Edmunds' in-house team of unbiased car-shopping experts provide industry-leading vehicle reviews and shopping tips, and the company also has a 20-year-old forums community of car shoppers and enthusiasts, where members can get shopping advice and learn what others are buying and leasing cars for. The company is regarded as one of America's best workplaces by Fortune and Great Place to Work. Edmunds is based in Santa Monica, California, and has a satellite office in downtown Detroit, Michigan.

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SOURCE Edmunds

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