Auto market appears to be tilting in favor of prospective buyer

(August 29, 2018) Consumer research and ratings firm J.D. Power has released its July auto sales forecast, and the trends aren’t looking great for the industry. Monthly new-vehicle retail sales had increased for the previous 54 months compared to the same months in the previous year. However, July’s sales were projected to have a 3.2% decrease compared to July 2017.

But with dealers offering even bigger savings during Labor Day weekend, especially on older models, potential buyers will certainly be asking if now is a good time to purchase a car.

At the moment, the market appears to be tilting in favor of the consumer. But there are more questions than just whether or not to buy. Should buyers apply for financing from banks, credit unions or manufacturers? Which manufacturers offer the best financing and leasing terms? How do interest rates compare for new versus used vehicles?

WalletHub answers these questions based on a detailed analysis of financing offers from a diverse group of more than 150 lenders. The data provided in this report, along with a panel discussion featuring industry experts, will help prospective buyers make an informed decision.

Key Findings

   • Interest rates for new cars are at one of their lowest point in the past three years. However, the average new-car loan now charges 12 percent less interest than the average used-car loan.

    • Now is not the time for people with excellent credit to buy used cars. The average interest rate for such buyers has risen nearly 35 percent since Q3 2015.

    • Overall, buyers who have fair credit will end up spending about five times more to finance a vehicle than someone with excellent credit, which equates to $6,418 in additional interest payments over the life of a $20,000, five-year loan.

    • Consumers in the market for a new car should start their search for financing with car manufacturers (rates 32 percent below average) and credit unions (16 percent below average). Regional banks (12 percent above average) and national banks (16 percent above average) should be secondary options.

    • Car manufacturers continue to lack transparency when it comes to leasing offers, with the average one receiving a WalletHub Transparency Score of 4.3 out of 10. The most transparent manufacturers currently include Mini, BMW, Mercedes, Honda, Toyota, Nissan, Audi, Hyundai, but even they registered only a 6-point rating.

    • Kia, Mazda, Ford, Infiniti, Subaru, Dodge, Mini offer the lowest financing rates among the major car manufacturers surveyed by WalletHub. Subaru, Toyota, Infiniti, Ford, Acura, Volkswagen, Mercedes have the best leasing offers.

Financing Offers by Car Manufacturer

It is important for consumers to understand that car-dealership financing offers may come from the financing arm of a car manufacturer or from a third-party financial institution. The following offers reflect financing available directly from car manufacturers’ financing arms.

Manufacturer Transparency

Leasing offers are the most difficult type of car-purchasing arrangement for consumers to understand, as they lack the equivalent of an APR that can be used for comparison. As a result, the transparency of manufacturers about these deals is integral to a consumer’s ability to make an informed decision.