With interest rates for car loans on the rise, many people are opting to purchase more affordable cars with cash. This trend is especially prevalent among buyers looking for vehicles under $10,000. In this blog post, we will explore how high-interest rates for car loans have led to an increase in cash purchases of affordable cars.
- High-Interest Rates for Car Loans Car loans are a popular way for people to finance their car purchases. However, interest rates for car loans have been steadily rising over the years. According to Bankrate, the average interest rate for a 60-month new car loan is 4.20%, and for a used car loan is 4.88% as of April 2023. These rates can be even higher for buyers with poor credit scores.
- Increasing Cost of Car Loans With the rise in interest rates, the cost of car loans has also increased. This means that buyers end up paying more for their car purchase over the life of the loan. For example, a $10,000 car loan at 5% interest for 60 months will cost a total of $11,616.80. This is an additional $1,616.80 in interest payments alone.
- Rise in Cash Purchases of Affordable Cars As a result of these increasing costs, more people are choosing to buy affordable cars with cash. Cars under $10,000 are a popular option, as they can be easily purchased without a loan. These cars are often older models, but they can still be reliable and meet the needs of many buyers.
- Advantages of Cash Purchases Purchasing a car with cash has several advantages. First, it allows buyers to avoid the additional cost of interest payments. Second, it gives buyers more flexibility in negotiating the price of the car. Finally, it can help buyers avoid the stress and hassle of the loan application process.
The rise in interest rates for car loans has led to an increase in cash purchases of affordable cars under $10,000. While these cars may be older models, they can still provide reliable transportation for many buyers. Purchasing a car with cash also allows buyers to avoid the additional cost of interest payments and provides greater flexibility in negotiations.