Auto loan rate forecast for 2020

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If you’re planning to buy a car in 2020, whether new or used, expect to pay more to finance it — especially if your credit isn’t so good.

Greg McBride, CFA, Bankrate chief financial analyst, expects the national average for a 60-month new car loan to hit 4.75 percent. He forecasts that 48-month loans for used vehicles will average 5.5 percent next year. The average 60-month new car loan finished 2019 at 4.61 percent, according to Bankrate data, while the average 48-month used car loan finished at 4.57 percent. The average 36-month used car loan finished the year at 5.13 percent.

“Competition among banks and credit unions kept a lid on car loan rates when the Fed was raising rates, but limited how far they could fall once the Fed started cutting,” McBride says.

“Higher delinquencies and defaults among subprime borrowers will lead to tighter credit and higher rates for car buyers with weaker credit,” he says. “But consumers with good credit will find 2020 car loan rates comparable to 2019, with only slight increases by year end.”

Average price for a new vehicle hits all-time high

Edmunds, a source of auto industry data, reviews and advice, says the average transaction price for a new vehicle in November 2019 rose to an all-time high of $37,981, with an average loan term of 69.3 months, a down payment of $4,365 and a monthly payment of $568.

Five years ago, the average transaction price for a new vehicle was $33,282, with a loan term of 67 months, a down payment of $3,560 and a monthly payment of $492, Edmunds reports.

McBride says one thing car buyers can do to save money in 2020 is to scale back on the cost of their vehicle purchases.

“The average amount financed continues to go up,” he says. “People continue to stretch into longer and longer loan terms in an effort to squeeze those big payments into their household budgets.”

He adds: “People’s desire to compromise their financial flexibility and pour a lot of money into a depreciating asset just for the sake of driving a nice, new car never ceases to amaze me.”

How to save money when buying a car

Consumers’ shift away from passenger cars to bigger vehicles such as SUVs and pickup trucks is one factor driving up prices. But there is good news for shoppers who are willing to consider a used vehicle instead of a new one.

There is a swarm of off-lease trucks and SUVs entering the used car market, Edmunds reports, giving buyers more choices of popular body styles and features.

“Shoppers who are priced out of the new car market will likely be very pleasantly surprised by how far their dollars can go if they buy used,” Ivan Drury, Edmunds’ senior manager of industry insights, says in a news release.

“Buyers can now find a huge selection of nearly new vehicles that are in excellent condition and packed with options at a very attractive price.”

People’s desire to compromise their financial flexibility and pour a lot of money into a depreciating asset just for the sake of driving a nice, new car never ceases to amaze me.


– Greg McBride, CFA, Bankrate chief financial analyst

Edmunds data for Q3 2019 showed that car shoppers could have saved nearly $15,000 on average by buying a 3-year-old vehicle instead of the brand-new equivalent.

“Buying used will open buyers up to brands and body styles they would never be able to afford on the new market,” Drury says.

Before you shop for a car, use Bankrate’s auto loan calculator to help you figure out how big a monthly payment you can afford. Then shop around for the best auto loan rates.