Auto loan rate forecast for 2023: Rates will increase due to Fed decisions Part Of 2023 rate forecasts In this series 2023 rate forecasts Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools as well as publishing original and objective content, by enabling you to conduct your own research and compare data for free – so that you can make sound financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation can affect the way and when products are featured on this website, for example, for example, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. This applies to our mortgage or home equity products, as well as other home lending products. This compensation, however, does not influence the information we publish, or the reviews that you see on this site. We do not contain the universe of companies or financial offers that may be available to you. SHARE: Photo by Getty Images; Illustration by Orli Friedman/Bankrate

3 min read Published January 03, 2023

Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the details of borrowing money to purchase an automobile. Written by Chelsea Wing Edited by Student loans editor Chelsea has been with Bankrate since early 2020. She’s committed to helping students navigate the daunting cost of college as well as simplifying the complex world of student loans. The Bankrate guarantee

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We make sure that everything we publish ensures that everything we publish is accurate, objective and reliable. The loans reporters and editors focus on the points consumers care about the most — various types of loans available as well as the best rates, the most reliable lenders, how to pay off debt and more — so you’ll be able to feel secure when making a decision about your investment. Editorial integrity

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There are money-related questions. Bankrate has the answers. Our experts have helped you understand your finances for more than four decades. We are constantly striving to provide consumers with the expert advice and tools needed to be successful throughout their financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is honest and precise. Our award-winning editors and reporters create honest and accurate content that will help you make the right financial choices. The content we create by our editorial team is factual, objective and is not influenced by our advertisers. We’re transparent about the ways we’re capable of bringing high-quality content, competitive rates, and helpful tools to our customers by explaining how we make money. is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods or services, or when you click on specific links on our site. So, this compensation can affect the way, location and in what order items are listed, except where prohibited by law. This is the case for our mortgage home equity, mortgage and other home loan products. Other factors, such as our own rules for our website and whether or not a product is offered in the area you reside in or is within your self-selected credit score range can also impact how and where products appear on this site. We strive to offer an array of offers, Bankrate does not include specific information on each credit or financial item or product. Drivers have faced problems and expensive prices at the dealership and in loan offices over the past year due to remaining supply chain issues and . The increase isn’t expected to decrease in the near future, according to Bankrate Chief Financial Analyst Greg McBride, CFA. “For most car buyers – those with a credit score of average or better rates will stay under 7% on new automobile loans and below 8 percent on used car loans,” says McBride. “But consumers with weaker credit profiles will have a much different experience as credit tightens and rates climb to double numbers.” Bankrate’s insight

Auto loan interest rates are expected to stay high because of changes made by the Fed and car prices could end up staying at a high. Five-year new car loans are predicted to reach 6.9 percent, while used four-year car loans to hit 7.75 percent in the next year.

What happened to auto loan rates in 2022? Throughout the year 2022 supply chain issues resulted in fewer vehicles that could be purchased — which led to a void of expensive costs. These prices are in addition to an exhausted economy preparing for the possibility of . On top of this, getting has become a challenge even for drivers. To know the reason the reason why so many families are living paycheck to paycheck and have budgets that are stretched take a look at the driveway. -Greg McBride Greg McBride As relief was on the horizon and vehicle prices began to level, refuted any substantial wins drivers could receive. The Fed increased the benchmark rate seven times during the past year, while lenders’ increase in tandem. According to Bankrate data, the financing for a new 60-month vehicle averaged 3.86 per cent in the month of January. Meanwhile, the calendar year is ending with an average of more than 6 percent. Following November’s record-high transaction prices, wholesale prices have dropped more than 15 percent. However, as prices started to stabilize and relief was discovered as high-interest rates increased. As a result, even though prices dropped by 5 percent per month however, monthly payments have increased more than 3 percent, according to the . Cost to finance is expected to remain elevated in the coming year, even though the labor and supply chain issues will be present, inventory for vehicles is expected to grow throughout next year, though not back to pre-pandemic levels. Even though November had an all-time record for the average transaction price (ATP) in the amount of $47,681. This was also the first month since the summer of 2021 in which the ATP was less than the MSRP average as per . This is good news for buyers but still doesn’t solve the issue of the high prices. The concurrent and decrease in prices for vehicles is likely to continue to be the same until 2023. The rates are likely to increase in the coming years as explained by McBride, “An active Fed will mean further increase of auto loan rate.” While rates are likely to be “tempered by the competition of lenders” he explains, drivers must be prepared to pay more to finance their cars. This is especially the case for those whom they will bear the burden of the high interest rates. What next steps should consumers take? The fact is, there’s no ideal time to buy take out a loan, and rising costs throughout the board make it difficult to get a good deal. If you are able to wait for a while, it could save you money. If not, be prepared to spend more, and think about how to buy in an environment that is not so favorable. “For an explanation as to why so many households are living paycheck to paycheck and have tight budgets take a look at your driveway” McBride says. McBride. “The average monthly cost of the new car is in the region of $700 and the typical used car purchaser is committing to $500 monthly payments. These are costly payments.” To ensure your budget is healthy and to find the most affordable price for your next car purchase, follow these steps. Be on top of your payments to your credit cards and loan payments. A history of timely payments boosts your credit score and will enable you to qualify for better interest rates. Check out a variety of auto loan lenders to see which is the most favorable price. Time your car purchase to coincide with any seasonal deals dealerships might offer. Be flexible. With smaller inventory, you might have to be prepared with backup cars or colors. Find a variety of dealerships and research MSRPs before you take the test drive.


The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers with the ways and pitfalls of borrowing money to purchase an automobile. Written by Chelsea Wing Edited by Student loans editor Chelsea has been working at Bankrate since the beginning of 2020. She is invested in helping students to navigate the daunting cost of college as well as dissecting the complexity in student loans.

Student loans editor

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