Interest rates for new vehicles in May dropped to the lowest level seen by the industry in nearly seven years, according to the car shopping experts at Edmunds. The annual percentage rate (APR) on new financed vehicles averaged 4 percent in May, compared to 4.3 percent in April and 6.1 percent a year ago. This is the lowest average interest rate since August 2013, and the third lowest Edmunds has on record dating back to 2002.

Edmunds analysts note that 0 percent finance offers dipped slightly in May compared to April, but still remained at near-record levels; these deals constituted 24 percent of all new financed purchases, compared to 25.8 percent last month. Edmunds data also reveals that 47 percent of all financed purchases received an APR below 3 percent in May, compared to 41.5 percent in April.

“Consumers who purchased a car in May got to take advantage of some of the best deals we’ve ever seen, thanks to a combination of Memorial Day weekend sales and generous incentives offered by automakers to spur demand during the pandemic,” said Jessica Caldwell, Edmunds’ executive director of insights. “Even with 0 percent finance deals down slightly, more car shoppers got better financing rates than usual.”  

Edmunds experts note that loan term lengths sustained near-record highs in May. The average loan term length for a new vehicle was 71.4 months, which is the second highest Edmunds has on record, compared to last month’s average of 73.4 months.

Edmunds is forecasting that May U.S. new car and truck sales will hit 1,074,542,  an estimated seasonally adjusted annual rate (SAAR) of 11.8 million. This reflects a 32.5 percent decrease in sales from May 2019, but a 50.5 percent increase from April 2020.

“We can safely say that April was the bottom for auto sales during the coronavirus pandemic,” said Jessica Caldwell, Edmunds' executive director of insights. “There's still a long road to recovery ahead, but May auto sales are a really encouraging sign for the industry.”

Edmunds experts note that automakers have already begun to dial back some of the more generous financing incentives made available at the start of the crisis; consumer demand continues to grow and inventory could begin to dwindle as auto manufacturers work on getting their factories safely and consistently up and running.

Edmunds estimates that retail SAAR will come in at 10.2 million vehicles in May 2020, with fleet transactions accounting for 13.5 percent of total sales.

 

A record number of consumers are upside down on their car loans, according to new research released by the car shopping experts at Edmunds. Edmunds data shows that in April an all-time record share of 44 percent of new vehicle sales with a trade-in had negative equity, compared to 40 percent in March and 33 percent in April of 2019. The average amount owed on upside-down loans also climbed to an all-time record high of $5,571 in April, compared to $5,405 in March and $5,036 in April of 2019.

“At first glance, the numbers are certainly alarming, but there are some potential upsides for shoppers with negative equity who purchased a vehicle in April compared to those who did so just a year ago,” said Ivan Drury, Edmunds’ senior manager of insights.

Edmunds data shows that the average interest rate for loans involving a trade-in with a carried-over balance was 7.3 percent in April 2019, and in April 2020, that number dropped to 4.7 percent.

Edmunds reported that April will be a record down month for the auto industry due to the coronavirus pandemic, forecasting that 633,260 new cars and trucks will be sold in the U.S. for an estimated seasonally adjusted annual rate (SAAR) of 7.7 million. This reflects a 52.5 percent decrease in sales from April 2019, and a 36.6 percent decrease from March 2020. Edmunds analysts note that this is the lowest-volume sales month dating back to at least 1990; the second worst month for sales in the past 30 years was January of 2009, when 655,000 vehicles were sold.

“April auto sales took the biggest hit we’ve seen in decades,” said Jessica Caldwell, Edmunds’ executive director of insights. “These bleak figures aren’t just because consumers are holding back on their purchases — fleet sales are seeing an even more dramatic drop as daily rental business has dried up. Like many other industries, the entire automotive sector is struggling as the coronavirus crisis continues to cripple the economy.”

Edmunds experts note that plans for easing shelter-in-place orders across the country in May could open up opportunities for automakers and dealers to capture some deferred demand, but there is still economic uncertainty ahead.  

“April is likely the bottom for auto sales, so hopefully there’s only room for improvement from here,” Caldwell said.

Edmunds is extending through the end of May the 50 percent discount that it provided to its dealer partners in April. Subscription services for dealer partners will remain active and fully supported by Edmunds’ sales teams.

“Edmunds is doing everything it can to support our dealer partners as our industry continues to navigate through this crisis,” said Avi Steinlauf, Edmunds’ chief executive officer.

Edmunds has also launched a completely redesigned Industry Center page, where dealers can find all of Edmunds’ free digital product offerings and solutions that will help them better navigate the challenges of the current selling environment. These include inventory badges on the Edmunds website for stores that offer home delivery or have custom hours, and Edmunds’ Digital Retailing solution, which lives on the Edmunds website and enhances remote sales by driving car shoppers who have already built their deals online directly to dealers.

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