SANTA MONICA, Calif. — Interest rates for new vehicles in May dropped to the lowest level seen by the industry in nearly seven years, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 4% in May, compared to 4.3% in April and 6.1% a year ago. This is the lowest average interest rate since August 2013, and the third lowest Edmunds has on record dating back to 2002. 

Car shoppers are showing that they’re comfortable committing to longer loans to get the vehicles that they want right now, especially with the ongoing availability of 0% deals.

Edmunds analysts note that 0% finance offers dipped slightly in May compared to April, but still remained at near-record levels; these deals constituted 24% of all new financed purchases, compared to 25.8% last month. Edmunds data also reveals that 47% of all financed purchases received an APR below 3% in May, compared to 41.5% in April. 

“Consumers who purchased a car in May got to take advantage of some of the best deals we’ve ever seen, thanks to a combination of Memorial Day weekend sales and generous incentives offered by automakers to spur demand during the pandemic,” said Jessica Caldwell, Edmunds’ executive director of insights. “Even with 0% finance deals down slightly, more car shoppers got better financing rates than usual.”   

Edmunds experts note that loan term lengths sustained near-record highs in May. The average loan term length for a new vehicle was 71.4 months, which is the second highest Edmunds has on record, compared to last month’s average of 73.4 months. 

“Car shoppers are showing that they’re comfortable committing to longer loans to get the vehicles that they want right now, especially with the ongoing availability of 0% deals,” said Caldwell. "But these incentives aren't going to last forever. It’s going to get tougher for car shoppers to find good deals as inventory declines over the new few months.” 

Read: Average New-Vehicle Prices Up 4% Year-Over-Year in May 2020