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Car Loan Interest Rates Move Up, Making Leasing A Much Better Deal

Car Loan Interest Rates Move Up, Making Leasing A Much Better Deal

June 6, 2018

According to a recent article by Edmunds, interest rates on auto loans are increasing. These interest rates are expected to reach record highs, the likes of which have not been seen for the past nine years. The combination of increased interest rates and higher sticker prices are making new vehicles less and less affordable.

Why Are Interest Rates Going Up?

As the US Federal Reserve raises interest rates in response to a strong economy and the fear of inflation, the cost of borrowing is steadily increasing. All of those great new car loan deals with zero percent interest rates are going away, as the cost of money increases and interest rates go up.

At the same time, vehicle prices are increasing, thanks to increased safety, fuel economy, and emissions standards. Increasingly sophisticated driver assistance and infotainment technology also add to the sticker prices of new vehicles.

Larger Loans + Higher Interest Rates = Bigger Monthly Loan Payments

In its recent “State Of The Automotive Finance Market,” consumer credit reporting agency Experian revealed that the average loan amount for a new vehicle in the first quarter of 2018 rose to $31,455, up $921 from a year earlier. The average monthly payment for a new-vehicle loan has increased to $523, while the average new vehicle loan term has grown to 69 months.

This is a very large amount of debt to take on for a new vehicle. What can the average new car shopper do to cut the cost of driving a new car?

Leasing Gets You Out Of The Large Monthly Payment Trap

You get so many benefits by leasing a vehicle instead of buying one. First, you avoid getting trapped in a huge, long-term loan at high interest rates. Then you are free to enjoy all the other great economic benefits of leasing, including:

  • You have a much more affordable monthly payment
  • You have a much shorter term on your lease
  • You are covered by the warranty for the entire term of the lease
  • You can lease with little or no money down
  • You can drive a nicer vehicle
  • You can have a vehicle with all the latest technology and safety features
  • You can walk away at the end of the lease with no concerns about the vehicle’s value
  • You can step right into another lease and do it all again

Leasing Leaves More Money In Your Pocket For Other Things

Wouldn’t you rather have some extra cash each month to use for other important things you need? Wouldn’t it be great to be protected from the expensive repairs that can happen once your vehicle goes out of warranty? There are so many good reasons to give leasing a try. Leasing makes so much financial sense in today’s environment of rising interest rates.