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“As with last year, macroeconomic uncertainty and affordability challenges persist, while higher fuel prices are an additional headwind this year. Despite all these complex dynamics, new vehicle demand remains robust. In fact, retail consumers are expected to spend $51.8 billion buying new vehicles this month, up $1.2 billion from a year ago and the highest ever for the month of July,” said Thomas King, president of OEM solutions at JD Power.

“Regarding affordability, the cost of financing a new vehicle keeps easing, though not by enough to neutralize the structural affordability pressures weighing on buyers. The average interest rate on new-vehicle loans is expected to fall 7 basis points to 6.54%, the lowest July reading since 2022. However, the average transaction price of a new vehicle has increased to $45,369, an increase of 1.2% from a year ago, while average monthly finance payments have climbed 3.3% to $808, the highest ever for the month of July. A key driver of the higher monthly payment, despite longer loan terms, is lower trade-in equity. Many of the buyers returning to showrooms today purchased when prices were at their peak several years ago when inventory was scarce. This is resulting in more buyers carrying negative equity on their trade-in; 29.4% of trade-ins had negative equity in July, up 1.1 percentage points from a year ago,” said King. Continue reading →