Affordability issues continued to hamstring buyers of new and used vehicles in the first quarter, despite increased incentives.

A combination of still-elevated interest rates and vehicle prices kept annual percentage rates high, Edmunds said.

The conditions resulted in a continued increase in the share of trade-in vehicles in negative equity: 23% compared to 18% a year earlier. In fact, the average negative equity amount hit a record at $6,167.

Interest rates, though increases have stopped, have also not been cut, and their elevated levels are putting the brakes on sales, said Edmunds Head of Insights Jessica Caldwell.

“… elevated interest rates have dampened any positive market momentum. The resurgence of negative equity is only compounding the affordability challenges, as consumers who regretted their pandemic-induced purchases are now encountering lower-than-expected vehicle values when returning to dealerships for a new purchase.”

The average new-vehicle annual percentage rate was 7.1% in the first quarter, the fifth quarter in a row it’s eclipsed 7%, Edmunds said. Used-vehicle APRs were essentially flat at 11.7%.

Monthly payments averaged $735 for new vehicles and $546, down from $561 in the fourth quarter.

It was the fourth straight quarter that more than 17% of borrowers had monthly new-vehicle payments of $1,000 or higher, Edmunds said.

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