Financing pushes monthly cost of new cars to $702

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Why drivers spend more to buy a new vehicle

The average new car transaction in July was $45,869, according to a joint estimate by JD Power and LMC Automotive. That’s down a bit from the all-time high of $45,988 set in June.

Several factors play into the higher costs, experts say:

  • Supply chain constraints: Amid an ongoing shortage of the computer chips needed to complement today’s cars, consumer demand continues to outstrip supply, driving prices up. Over the past year, new car prices have risen 10.4%, according to the latest consumer price index.
  • Vehicle popularity: Consumer preference has also shifted over the past decade to SUVs and trucks from sedans, which can cost less.
  • Fewer incentives: With dealerships having no trouble making sales, manufacturer rebates fell to an average of $894 per vehicle, down 54.7% from a year ago, according to JD’s estimate. Power/LMC. This is the first time the average has fallen below $900.

How to save money when financing a new car

If you are considering financing the purchase of a new car, there are some things to consider that could reduce the amount you need to finance.

To start, keep in mind that consumers with higher credit scores are able to obtain better loan terms.

“Raising your score can make all the difference in a car loan…the more you can get, the better rate you’ll be offered,” said certified financial planner Malcolm Ethridge, executive vice president and financial adviser at CIC Wealth. in Rockville, Maryland.

Additionally, if you plan to use dealer financing, you may be able to negotiate the interest rate down, Ethridge said. “People probably don’t focus on that,” he said.

You also need to be realistic about how much car you actually need. Some cars may have features that drive up the price but you could do without, he said.

“Be careful to find one that has fewer features…because that can drive down the price of the car,” Ethridge said.

Trade-in values ​​remain “extremely good”

And if you trade in a car, it will also reduce the amount you need to finance. Depending on the specifics of the car, it could be worth more than expected.

Trade-in values ​​”are still extremely good compared to what they would have been worth in normal times,” Drury said at Edmunds. For example, for 5-year-old cars, “you’re still thousands of dollars ahead of what you technically should be,” he added.

“If you look at a 5-year-old car five years ago versus one today, there’s no comparison,” Drury said. “You have so much equity in this car.”

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