402.744.6203 help@caredge.com
Used Car Dealership Profit Margins: A Consumer’s Guide

Used Car Dealership Profit Margins: A Consumer’s Guide

Understanding used car dealership profit margins can make buying a car at a fair price easier than you’d think. Thanks to fresh industry data we have insight into the profitability of eight publicly traded dealership groups. And while most used car dealers experienced a decrease in gross profits per used vehicle sold in Q1 2023, there were exceptions — Carmax (+3%), AutoNation (+35%), and Carvana (+52%).

Here’s the breakdown:

  • Carvana: $4,303 (52% increase)
  • CarMax: $2,277 (3% increase)
  • Asbury: $2,141 (14% drop)
  • AutoNation: $2,117 (35% increase)
  • Group 1: $1,689 (16% drop)
  • Lithia: $2,120 (30% drop)
  • Penske: $1,808 (21% drop)
  • Sonic: $1,626 (6% drop)

So, how does understanding dealership profit margins empower you, the consumer to get a better deal? Let’s dive in.

Timing Your Purchase and Negotiating Power

Fluctuating profit margins in the market hint at competitive dynamics, potentially paving the way for better deals for consumers. This could be an excellent time to consider buying a used car, especially from dealerships that are currently facing profit contractions.

With the knowledge of dealership profit margins, you could have an edge in price negotiations. If a dealership enjoys high-profit margins, there may be more room for negotiation. On the flip side, those with tighter margins might not offer as much price flexibility, but they could be keener on making a sale.

Interestingly the used car dealers with the greatest profit margins are Carvana and CarMax, the two dealer groups that do not allow negotiations. This means that if you are considering purchasing from one of these dealers you need to understand that you are paying a premium, and you likely could save money on a comparable vehicle from another dealer.

Exploring Dealerships and Researching Vehicle Value

Don’t restrict your search to one dealership or group. The disparity in profit margins among dealership groups underscores the value of shopping around. Independent dealerships could also provide attractive deals.

It’s also paramount to research the fair market value of the vehicle you’re interested in. Resources like CarEdge can provide an extensive array of data to help you make an informed decision.

Days Supply of Dealership Inventory – Another Crucial Metric

Understanding the days supply of inventory is another valuable piece of information. It indicates how long a dealer’s current stock of used vehicles would last given the current sales rate. The longer a vehicle stays on the lot, the more it costs the dealership in the form of floorplanning costs, which can encourage them to negotiate on price.

Current used inventory days supply for the six groups are:

  • Asbury: 27 days
  • AutoNation: 29 days
  • Group 1: 30 days
  • Lithia: 52 days
  • Penske: 39 days
  • Sonic: 29 days

Unfortunately we do not have a reliable source for days supply for Carvana or CarMax.

This information could influence your buying strategy. Dealerships with a high inventory supply might be more willing to negotiate on price. Timing your purchase when the inventory supply is high could lead to better deals. A high supply might suggest overpricing or less popular models, whereas a low supply could indicate competitive pricing or high-demand models.

Try using the new FREE CarEdge Data Explorer to get a sense for days supply of inventory in your area.

With this knowledge of dealership profit margins and days supply of inventory, you’re well-equipped for your next car buying journey. It may not look like the good old days, but you’re setting the stage for a win-win negotiation. After all, in this new era of car buying, information is your strongest asset.

Car Dealers vs. Consumers: Make Your Voice Heard

Car Dealers vs. Consumers: Make Your Voice Heard

In June, the Federal Trade Commission proposed a new set of rules that would ban unscrupulous sales practices that are commonly employed at car dealerships. Among the notoriously anti-consumer practices targeted are the sale of products without benefit, bait-and-switch pricing, forced add-ons, and discriminatory practices for cash buyers.

There’s a reason the annual trustworthiness of profession poll from Gallup ranks car salespeople at the bottom; it’s not because every salesperson is bad, it’s because a few bad apples ruin the bunch. Over the years I have heard countless stories from our community of these aforementioned practices. Still, powerful dealer lobbies are combating the FTC proposal, and it’s become clear that they’re determined to defeat the proposal at all costs.

Fortunately, consumers have a real opportunity to have their voices heard. A public comment period is now open until September 2022, and we’re calling on you to share your opinion with the FTC. It’s clear that auto dealers are already amassing a unified position, and we need to do the same. If consumers show up in numbers, car buying may be transformed for the benefit of we, the people. Time is of the essence, as this narrow window leaves less than two months for the public to share their support.

FTC Proposal Levels the Playing Field for Car Buyers

On June 27th, The Federal Trade Commission proposed a new set of rules that would ban specific auto sales tactics commonly used by car dealers to take advantage of consumers. In an FTC proposal titled Motor Vehicle Dealers Trade Regulation Rule No. P204800, the following auto dealer practices are targeted:

  • Selling Products with No Benefit to the Customer
  • Advertising the Real Price of the Car Online
  • Non-Discriminatory Practices for Cash Buyers
  • Enhanced Consent for F&I Products

FTC Bureau of Consumer Protection Director Samuel Levine explained the reasoning behind the proposed rules. “As auto prices surge, the commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising and other practices that hit consumers’ pocketbooks. Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

The average new car transaction is now $47,202, or 72% of the median household income in the United States. Bait-and-switch pricing, forced add-ons and dishonest financing tactics have all contributed to the average monthly car payment soaring to $730, 40% higher than the average payment just five years prior. With car prices at record highs, consumers are fed up with anti-consumer sales tactics that proliferate at many dealerships nationwide. 

This is our chance as consumers to unite behind a proposed rule that could change car buying for the better unlike ever before. However, this battle is far from won. 

Car Dealer Dissent Has Been Swift, Yet Flawed

The National Automobile Dealers Association, or NADA, is a nationally-recognized industry and political force that represents over 16,000 auto dealers nationwide. Every year, the NADA and its counterpart for independent dealers spend millions of dollars lobbying politicians to advance legislation that is pro-dealer, too often at the expense of the consumers the auto industry relies on. The power and influence of today’s car dealers can be traced directly to the NADA and NIADA. 

Needless to say, the dealer lobby isn’t happy about the FTC’s proposed rules. In a letter to the FTC, the NADA characterized the proposal as unsupported, sloppy and inconsistent. How so? NADA senior vice president Paul Metrey dismissed the proposal as “woefully inadequate” because the regulation is unnecessary in his view, because it would address “things they can go after” already. It’s as if dealers and their powerful lobbies are fully aware of the anti-consumer sales tactics flourishing in the industry, but are content with pushing the limits of regulation until enforcement encroaches on their bottom lines.

Read the full NADA response here.

Another flawed argument promoted by the NADA is that complaints are few and far between. The FTC said it received more than 100,000 auto-related complaints in 2021. To counter that startling statistic, the NADA says there were 42 million new- and used-car sales last year. We all know that car buyers rarely have the time to seek out the procedures to submit a formal FTC complaint. Consumers have jobs, families, and other financial obligations on their minds. Imagine if one out of twenty dishonest car sales resulted in a formal complaint. In reality, reporting is likely even lower.

CarEdge’s Community Members Share Troubling Car Buying Experiences

There’s no way of knowing just how widespread this problem is, yet every day our community of CarEdge members shares tales of shady dealership practices, and dishonest, anti-consumer tactics that cost them time and money. Whether it be comments on YouTube, or essays we receive via email; our millions of monthly viewers are fed up with the status quo, and demand change.

Industry media outlets are picking sides, and some heavyweights are clearly siding with dealer lobbies. Industry news outlet Automotive News published an editorial promoting the talking points disseminated by the NADA and NIADA. They too are calling for interested parties to submit comments during the narrow public comment period.

The Time to Act Is NOW. Make Your Voice Heard By Submitting a Comment in Favor of the FTC’s Proposal

The FTC’s open commenting period is now open, and it will remain open until September 12, 2022. Anyone can submit a comment to voice support or displeasure with the proposal. In a classic David versus Goliath scenario, dealer lobbyists are facing off against consumers like you and I. With massive auto dealer lobbies and even media outlets calling for dealers to submit comments opposing the proposed rules, it’s up to all of us to make our voices heard. Submit a comment today on Regulations.gov. This should be a priority for all Americans who are sick and tired of car buying being synonymous with deception and dishonesty. We’ll keep you posted on the latest developments.

Read Ray’s comment to the FTC

View Ray’s comment here, or read it below:

As someone who spent 43 years managing automobile dealerships and advocating for better enforcement of rules and regulations regarding dealer advertising and F&I practices, I strongly support your efforts to finally rid America of the unethical practices that many dealerships employ. Business decisions are made by dealerships everyday as to how to advertise the price of a vehicle online. Should we include the destination charge that is part of the MSRP in the price or should we disclose that in the small print? Should we disclose any dealer installed accessories or packages that the customer is expected to pay for in the advertised price or should we only disclose that once they have come into the dealership? Should we disclose all dealer and state fees or again wait until the customer has agreed to buy the car? How should we disclose our F&I offerings, or our rate markups for placing indirect loans? These are all business decisions that truthfully should not have to be made, full disclosure and transparency is not only what consumers want, it is what they are entitled to. You can read many consumer complaints in regards to this issue on our YouTube channel: https://www.youtube.com/c/CarEdge/ videos, just click on just about any video and read what consumers are saying on a daily basis.

One must question what is wrong with a society as a whole when everyone knows that consumers are taken advantage of everyday when purchasing a car or truck and everyone turns a blind eye to it. Law enforcement, consumer protection agencies, State Attorney Generals, the Federal Trade Commission and many other “consumer” protection organizations all know what is going on yet do next to nothing to correct it. The essence of commerce should not be “who can we take advantage of today” but rather how can we operate in a consumer respectful and honest manner. I believe the enactment of these proposals would bring us closer to the later and finally rid our society of the former.

Average Monthly Car Payments Skyrocket in 2022

Average Monthly Car Payments Skyrocket in 2022

Average monthly car payments have been increasing ever since the beginning of the chip shortage in 2020. Today, the average monthly car payment for a new car exceeds $700 for the first time ever, while the average monthly car payment for a used vehicle is more than $500.

Over the last 18+ months we’ve covered the tenuis rise of car prices. It’s shocking to think that the average car payment is now closing in on the average mortgage payment in America. Data from Edmunds shows that 12% of new car buyers in June are paying more than $1,000 a month. In 2021 the average home mortgage payment was roughly $1,000 a month. Let that sink in.

Here’s the latest data on new and used car payments, affordability, and which vehicles you should consider if you are looking for a relative “bargain” in today’s market.

Let’s dive in.

Get the most when you sell your car.

Compare and choose multiple offers in minutes:

Average monthly payment on a new car

Data from J.D. Power/LMC Automotive suggests that the average new car transaction price was $45,844 in June. As compared to data from Cox Automotive, this average transaction price is actually down considerably when compared to prices from the end of 2021 and earlier in 2022.

For example, at the end of 2021 the average transaction for a new vehicle was $47,077 according to Cox Automotive, however the average monthly payment was only $688. This was a function of cheaper interest rates.

Today, the average monthly payment for a new car stands at $712 dollars. That is more than rent for a one bedroom apartment in some cities.

Akron, OH$640
Wichita, KS$710
Lubbock, TX$720
Shreveport, LA$740
Lexington, KY$800
El Paso, TX$860
Baton Rouge, LA$860
Tallahassee, FL$860
Oklahoma City, OK$870
Des Moines, IA$890

Average loan terms for a new car sit at 70 months, with most consumers opting for 6 year financing terms at an average interest rate of just over 5%. Back in December of 2021 the average new car interest rate was under 4%, accounting for the uptick in monthly payment amounts.

Average monthly payment on a used car

Used-vehicle monthly payment at $503

As you very well know, used car prices have skyrocketed ever since the beginning of the chip shortage. For the first time ever, the average used car monthly payment sits above $500. Data for Q1 of 2022 shows an average interest rate of 8.6% and an average loan term of 68 months. We expect data for Q2 to show a significant increase in the interest rate and monthly payment. We would not be surprised to see 9%+ as the average interest rate on a used car loan, and monthly payments in excess of $525 for the first time ever.

Used hybrids and electric vehicles are especially expensive in today’s market, with monthly payments on more fuel efficient vehicles in excess of $700.

What vehicles have the most affordable monthly payments?

Cox Automotive tells us that the average transaction price for a new car was $47,148 in May 2022. Where are the new car values?

Sadly, non luxury vehicles are seeing their prices increase rapidly as more consumers look for “value”. The average price paid for a new non-luxury vehicle in May was $43,338; on average a customer paid $1,000 over MSRP for a new non-luxury vehicle. We are seeing some below MSRP deals on Stellantis brands; Jeep, Ram, Alfa Romeo, Chrysler.

The average luxury car buyer paid $65,379 in May. They also spent about $1,000 over MSRP to get their new car.

The average electric vehicle buyer paid $64,000 in May. The Chevrolet Bolt represents the only real “bargain” in the EV space.

The average truck buyer paid $56,216 in May, while the average van buyer paid $48,671, and the average SUV buyer paid $46,073. The only “value” segment on the list are cars, where the average sedan buyer paid $41,902 in May.

Automakers such as Nissan have average transaction prices of $34,681. Compared to other automakers such as Toyota ($40,036) and Hyundai ($35,988) they represent a relative “steal”.

Ford, Stellantis, and GM have seen their average transaction prices increase significantly. Ford’s average transaction price stands at $49,528. Stellantis is at $53,212, and GM is at $50,854.

The FTC is Cracking Down on Shady Car Dealers

The FTC is Cracking Down on Shady Car Dealers

Update: The public comment period is NOW OPEN. The deadline is September 12, 2022! Here’s how you can submit a comment. Share with your friends and family!

On June 27th, The Federal Trade Commission proposed a new set of rules that would make many commonplace car dealer sales tactics illegal. Let’s break down the proposal and discuss what tactics dealers use to take advantage of customers.

FTC Bureau of Consumer Protection Director Samuel Levine explained the reasoning behind the proposed rules. “As auto prices surge, the commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising and other practices that hit consumers’ pocketbooks. Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

From time to time, consumer’s voices are actually heard by those who have the power to make a change. The FTC explained the role of consumer complaints in the drafting of this proposal.

“Consumer complaints suggest that some dealers have added thousands of dollars in unauthorized charges, including for add-ons that consumers had already rejected. These issues are exacerbated when pre-printed consumer contracts automatically include charges for optional add-ons, when consumers are rushed through stacks of paperwork, or when they are asked to sign blank documents.”

Perhaps you’ve experienced this firsthand. We help CarEdge members cancel unwanted products all the time. It’s just another unnecessary obstacle to buying a car in 2022.

Without further ado, these are the four anti-consumer dealer practices targeted by the FTC’s proposed rules.

Selling Products with No Benefit to the Customer

The new FTC rule would ban all add-ons that do not add any benefit to the product. Examples of included products are nitrogen-filled tires that contain no more nitrogen than is normally found in the air, duplicate warranty coverage and unnecessary GAP insurance, a product that not every car buyer will benefit from.

Advertising the Real Price of the Car Online

How many times have you inquired about a specific car that was advertised, only to learn of a ‘market adjustment’ or slew of dealer add-ons? Transparent pricing is a novelty in today’s auto sales, however the FTC’s proposed rule would require that dealers advertise the true price of the car online.

Non-Discriminatory Practices for Cash Buyers

Why should any car buyer be penalized for paying cash? The new FTC rule would require auto dealers to advertise the cash price of the vehicle without add-ons. The customer would have to be told the price of the car, with and without financing. Notably, this mandatory price disclosure would have to be without optional add-ons from the get-go. No more teasing it out of the salesperson.

If the customer agrees to pay something different, both they and a dealership manager must sign a document saying so.

How to Challenge Forced Front-End Add-Ons At a Dealership

Enhanced Consent for F&I Products

“Express, informed consent” would be required for add-ons commonly pushed on buyers in the financing and insurance (F&I) office when buying a car. What would be different? Disclosures and consent options must go beyond “a signed or initialed document, by itself” or “prechecked boxes,” the FTC said. I’m wondering, why wasn’t it always like this?

Here’s 5 things you need to know before stepping into the dealership F&I office.

Opposition to the FTC Proposal

As this is breaking news, it’s too soon to know what dealership lobbies like the National Automobile Dealers Association think of it. I think we can all assume they won’t be fans of the proposal. The NADA spends $3 million a YEAR on lobbying efforts in Washington, and their influence is strong at the state level, too.

How did car dealerships become so powerful in America? It’s a story of power, money and influence.

Opposition to the new FTC proposal came from one of the panel’s own members. FTC Commissioner Christine Wilson felt “unlawful practices persist” within the auto retail industry, but said the proposal courted “unintended but negative consequences.” Commissioner Wilson cited prior regulations which had hurt competition and proved difficult to keep current. Interestingly, she also cited the rise of direct-to-consumer sales and Carvana’s online sales model as reasons for opposing the rule.

One state where the auto dealer lobby has enormous power is Florida. Over 1,000 car dealers belong to the Florida Automobile Dealers Association. Dissenting FTC Commissioner Wilson happens to be from Florida. Coincidence? Maybe.

Ironically, the FTC Could Be Doing Dealers a Favor

2023 F150 Lightning
The new Ford F-150 Lightning will soon be sold online with no-haggle pricing via Ford Model e. Can dealers compete with direct-to-consumer sales?

Can the dealership model save itself from the rise of direct-to-consumer sales? Transparent pricing would be a step in the right direction. With the dealer markups and bait-and-switch tactics all too common in today’s car buying experience, wouldn’t you opt for honest pricing given the chance?

Leave your comment in support of this proposal! We hope you’ll share this important opportunity with your friends and family.

Get the most when you sell your car.

Compare and choose multiple offers in minutes:

5 Predictions for 2022 and Beyond

5 Predictions for 2022 and Beyond

If you’ve noticed things getting a bit hectic lately, you’re not alone. Two years into the pandemic, 2022 has brought its own set of challenges, setbacks and surprises. Maybe you’ve been impacted by one of these challenges, or perhaps you’re one of the fortunate few who haven’t. Here at CarEdge we’ve been asking ourselves “what happens in 2022 and beyond” to help us plan for our business. Today I thought we would share our thoughts with you.

We’re entering a recession and will stay there for 12+ months

How will a looming recession affect consumers, automakers and the auto service industry?

Economists are only half-joking when they quip that we could be close to ‘talking ourselves into a recession.’ With an annual inflation rate over 8%, volatile stock markets, record-high gas prices, and rising interest rates, there are many factors that are dampening consumer sentiment in the United States.

An economic slowdown will impact nearly everyone, and each household will feel it differently. Although a recession by definition has not happened yet, there are indications that economic growth is slowing. Economists are taking note, and more than a few are sharing predictions. But when it comes to your money and lived experiences, how much do words matter? It’s a question worth pondering.

Recessions happen every four years on average

Diane Swonk is one of the most respected macroeconomists today, and this is what she had to say in a recent interview with PBS NewsHour. “I think the probability of recession is very high in the second half of the year and as we move into 2023. In fact, we’re forecasting what’s called a growth recession, which is when growth is not enough to hold unemployment down, and it continues to rise in 2023 to derail the inflation we have and get it back to being insignificant to most consumers.”

What happens to auto sales in a recession?

If a recession is knocking on our door, it’s wise to prepare as best we can. For most consumers, that means saving money and spending less. Discretionary spending, essentially spending by choice rather than by need, always plummets in a recession. For some (but not all) households, discretionary spending includes that shiny new car you’ve had your eye on. In a recession, auto sales decline significantly. 

Just how bad could it get? New vehicle sales in the U.S. fell nearly 40 percent during the ‘Great Recession’ of 2008. 2020’s pandemic-driven recession was the shortest in history, lasting just two months. Even then, auto sales were down 15 percent compared to 2019. 

Economic slowdowns affect the auto service and repair industry too, but the magnitude of impacts will depend on just how bad it gets. In most scenarios, the demand for auto service will stay fairly steady (as everyone needs occasional car maintenance). When the Great Recession put several million Americans out of work, the impact was significant and long-lasting, and enough to reduce the demand for auto maintenance for a few years.

The truth is, no one knows what the economy has in store over the next few years. Regardless, it would be wise to prepare for the worst while hoping for the best, even if that means putting off the purchase of your next vehicle. Our prediction is that a recession will be with us for 12+ months and that we’re already in the beginning stages of it.

Consumers will drive less

Consumers will continue to drive less as a result of changes in our ways of working post-pandemic. The “new normal” for consumers will be significantly fewer miles per year than in pre-pandemic years. In fact, we’ve already seen this trend showing up in national surveys of driving habits. 

In late 2021, a survey from Hankook Tire found that just 36 percent of Americans drive every day. The statistic decreased by 12% over the course of 2021, and if the first five months of 2022 are any indication, a new host of factors (notably record gas prices) are likely to keep drivers off the road. 

A recent article in Forbes highlighted the staying power of remote work. A third of workers feel more productive at home, and 36% of remote workers say they’d quit if they were forced back to the office. The nature of work in America has changed forever. Remote work may have a lasting impact on America’s driving habits, but it’s not enough to stop the post-pandemic traffic jam.

According to the U.S. Department of Transportation, travel on U.S. roads rose 11.2% in December 2021 compared with December 2020. The spike has resulted in a nearly full recovery in road traffic compared to 2019, with just 1% fewer miles being driven. 

What about gas prices? Clearly, driving costs a lot more than it did last year. The national average is $4.59 per gallon nationwide. That is 50 percent higher than gas was at this time last year, according to AAA. Shockingly, hundreds of dollars in added fuel expenses each month isn’t keeping drivers at home. 

Memorial Day weekend is expected to bring 37.9 million Americans to the road, according to Arrivalist. That’s more than the last pre-pandemic Memorial Day weekend. Will Americans continue to disregard the cost of fuel? Time will tell. Our prediction is that Americans will not return to their pre-pandemic driving habits.

Get the most when you sell your car.

Compare and choose multiple offers in minutes:

The car shortage will continue

Last year, 11 million cars were lost from production due to the worsening semiconductor chip shortage. Unfortunately, it doesn’t look like it’s getting any better. So far in 2022, 1.8 million cars have been removed from automaker production schedules. Over half a million of those cars were scheduled to be built in North America. 

Automakers will continue to struggle to produce enough new vehicles to meet consumer demand. The ripple effects from lost production in 2021 and 2022 will permeate throughout 2023, 2024 and 2025. We should expect a shortage of quality used cars and prohibitively high prices for in-market car buyers. Used vehicles will continue to appreciate (or at a minimum not depreciate as they did in pre-pandemic times). We’ve seen used car prices rebounding yet again over the past few weeks (see the latest numbers here). 

The average age of a vehicle on the road will continue to increase as consumers hold onto their existing cars longer. The average light-duty vehicle on American roads is now over 12 years old. Twenty years ago, the average auto was 9.6 years old. Drivers are responding to the car shortage by simply holding on to their cars longer. That’s not a bad idea with the way things are going. We expect this trend to continue.

Increased consumer demand for fuel efficiency (EV, PHEV and Hybrids)

Electric vehicle market share surpassed 5% for the first time in the first three months of 2022. And that was BEFORE gas prices shot up. But it’s not all about EVs, either. Hybrids, plug-in hybrids and full battery electric vehicles (collectively known as electrified vehicles) were up 41% year-over-year in 2021, despite average prices being thousands more than combustion engine counterparts. 

Even as consumers drive less, we should expect to see continued and increased demand for EV and hybrid powertrain vehicles. More consumers will become EV and Hybrid “curious” and consider those powertrains for their next vehicle.

See the latest EV market share numbers here

The average transaction price for a fully-electric vehicle is roughly $11,000 more than ICE vehicles. Incentives (such as the federal EV tax credit) help some buyers overcome the cost, but it’s still a luxury that most driver’s can’t afford. Will EVs get any cheaper? Not anytime soon, especially since battery production costs have thrown a wrench into automaker’s plans to lower prices.

Rising interest rates make borrowing more expensive

In an effort to mitigate inflation, we should expect interest rates to rise further. As the cost to borrow money increases, consumers (and businesses) will be more cash-conscious than before. The Federal Reserve just raised interest rates for the first time in three years, and they said it surely won’t be the last hike.

New car buyers probably won’t see much of a change at first. Captive lending makes it possible to hold off major rate increases for as long as possible to entice buyers into the dealer showrooms. However if the mortgage industry is any foreshadow of what’s to come, car buyers should expect auto interest rates to increase expeditiously over the coming months.

It’s important to remember that a higher interest rate will cost buyers of expensive vehicles most (on a dollar-for-dollar basis). A 6% interest rate will result in about $6,000 in total interest paid for a $40,000 loan over 60 months, but just $2,400 for a $15,000 loan over the same term.

How much do rising interest rates increase car payments? Let’s consider this example. Right now, the average amount borrowed with an auto loan is roughly $40,000 (wow!). With a 72-month loan, a 3.5% interest rate would result in $4,400 in interest paid over the life of the loan. With a 6% interest rate, that same loan would cost $7,700 in interest. It’s not pocket change.

CarEdge’s Take

Of our 5 predictions for 2022 and beyond we are most concerned about the impacts of a global recession and the continued car shortage. It’s impossibly difficult to predict all of the effects we’ll see from these phenomena, however we’re cautiously optimistic that we’ll be able to “weather the storm” and be on firmer footing because of it. By 2025 we think we are on the other side of “this”.

What can you do about these 5 known factors in the remainder of 2022? Stay alert, informed and prepared. Whether that means saving a few extra dollars or making that older vehicle last a little longer, every little bit will help ease the anxiety brought on by the uncertain times we live in.