Demand for new vehicles slows amid rising interest rates –

(NewsNation) — For much of the year, automakers have had a supply problem, but as production ramps up and interest rates continue to rise, now they’re worried about the opposite: lower demand.

Those fears are driven primarily by affordability concerns. With an average transaction price of $48,681, Americans who bought new vehicles last month paid more than ever. according to Cox Automotive


That high price is mainly due to strong luxury vehicle sales, said Michelle Krebs, an executive analyst at Cox Automotive, noting that new-car buyers in today’s market tend to be wealthier.

Overall, new vehicle prices increased 7.2% compared to last year, according to this week’s inflation report.

But the high sales price is only part of the total cost. On Wednesday, the Federal Reserve announced another half-point interest rate hike as part of an ongoing effort to curb inflation. Those increases are hitting auto loan interest rates, which have skyrocketed in recent months.

At the end of 2021, the average interest rate on a five-year new car loan was 3.85%, according to Today, the average interest rate for the same loan is about 6%.

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