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Gap Between New and Used Car Payments Reaches All-Time High

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author photo by Doug DeMuro September 2015
  • Industry analysts at Experian say the gap between new and used car payments is higher than ever
  • The difference in amount financed between new and used cars is also increasing
  • Experian says the gaps are growing as new cars get more expensive and drivers search for alternatives

The gap between new and used car payments is larger than ever. That's the latest news from automotive data experts at Experian, who say the average monthly payment for a new car during the second quarter of 2015 was $483, a difference of $122 over the $361 average monthly payment for a used car. That gap is wider than it's ever been since Experian began reporting the statistic in 2008.

The gap between new and used car payments isn't the only growing financial difference between new and used vehicles. Experian says the difference between the total loan amounts for new and used cars is also growing, with the average customer financing $28,524 for a new car during the second quarter of 2015 compared to $18,671 for a used car, a difference of nearly $10,000.

What's the reason for the widening gap between new and used car loan amounts? According to Experian, it has to do with a continued increase in new-vehicle pricing, something that's forcing more shoppers to consider used cars as an alternative to new models.

"As the price of new vehicles continues to rise and the gap between monthly payments for new and used vehicles widens, we see more and more consumers looking for ways to keep their vehicle payments affordable," said Melinda Zabritski, Experian's senior director of automotive finance. "This could be especially true for consumers who have the financial ability to pursue a new vehicle but may have sticker shock at the rising prices and don't want the accompanying high monthly payments."

The rising gap between new and used car pricing also benefits certified pre-owned (CPO) vehicle sales. Certified pre-owned vehicles are recent used models sold with a manufacturer warranty, which gives drivers additional peace of mind compared to a typical used vehicle. Since they aren't brand-new, CPO vehicles often boast a fairly substantial discount over new-car pricing, which is the best of both worlds for drivers: a nearly new car with a long warranty for a used-car price.

Those who aren't turning to used or certified pre-owned cars are looking for other ways to make new vehicles more affordable. As an example, Experian says the number of drivers choosing a traditionally long 73- to 84-month new-car loan increased by nearly 20 percent during the second quarter of 2015 to a surprisingly high 28.8 percent. That suggests shoppers are increasingly looking for ways to help lower their car payments as cars get more expensive.

What it means to you: New cars are getting more expensive, so drivers are looking to used cars and longer loan terms in order to lower their payments.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Gap Between New and Used Car Payments Reaches All-Time High - Autotrader