Will Higher Interest Rates Cool Demand for New Cars?
The average interest rate paid on a new vehicle purchase hit 5.7% in September, up from about 4% in 2021.

The average interest rate paid on a new vehicle purchase hit 5.7% in September, up from about 4% in 2021.
IMAGE: Getty Images
For much of the year, analysts believed that whatever automakers could build would sell amid a climate of heightened demand and tightened inventory levels.
They believed as inventory levels grew, the depressed sales pace of the first half of the year would pick up.
What they didn’t count on was a depressed economy. Now, flat sales for new cars are expected as automakers report third-quarter sales results.
Tight supplies remain an ongoing problem. Shortages of semiconductor chips and other components continue to hamper vehicle production and slow sales.
Higher interest rates also could cool demand. The average interest rate paid on a new vehicle purchase hit 5.7% in September, up from about 4% a year earlier, JD Power said.
“It seems likely that much of the pent-up demand from limited supply will dissipate quickly as high interest rates erode car buyers’ willingness and ability to buy,” said Charlie Chesbrough, senior economist at research firm Cox Automotive.
Cox Automotive has lowered its 2022 sales forecast to 13.7 million new vehicles, down 9% from 2021and far less than pre-pandemic levels when the industry sold over 17 million vehicles annually.
So far, car companies and dealers say consumers purchase new vehicles as soon as they land on the lot.
“There’s still really strong consumer demand and huge replacement demand,” Duncan Aldred, head of General Motors Co., told Aumag.
Record prices for new and used vehicles are keeping automaker and dealer profits high. The average price U.S. car buyers paid for new vehicles reached $45,971 in the third quarter, up 10% from a year earlier and the highest of any quarter on record, according to JD Power.
Originally posted on Auto Dealer Today
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