1. Car Buying Is Tougher and Pricier Than Ever
Automotive retail is at an inflection point. External economic forces, evolving buyer expectations, and other challenges like supply chain disruptions are reshaping the car buying experience. Dealerships, OEMs, and insurance providers who accelerate the adoption of a more flexible, customer-centric approach, backed by innovative tech solutions, will be better equipped to navigate this new terrain successfully.
The average annual cost of ownership is up more than 13 percent from last year to more than $12,000, or just over $1,000 a month, according to the latest research from the automobile owners group, AAA.*
2023 auto loan interest rates
US Interest Rate of Auto Loans
Economic headwinds are hurting everyone
Inflation is widespread and affecting car buying decisions across every economic segment, even the wealthy. Savvy dealers are looking for new strategies and products to help consumers combat the affordability crises. The sharp increase in auto loan rejection rates, coupled with rising ownership costs, are placing significant economic pressure on potential car buyers.
According to the Federal Reserve, the rejection rate for auto loans increased to 11% this year, more than twice 2022’s rate of 5.2%. This is the highest rejection rate since the start of the series in 2013.
Denied at the dealership... auto loan rejections soar
Inflation doesn't discriminate
In short, our study found that economic headwinds are hurting almost everyone. 73% of car buyers -- across all income and credit score brackets -- said interest rates affected their financing decision in one or more of the four ways listed in the chart below. The sharp increase in average ownership costs, coupled with the rising auto loan rejection rates, reveals the significant economic pressures potential car buyers face.
*27% of respondents said it did not affect their financing decision.
What may surprise some is that Inflation isn't merely touching low-income earners; it's widespread and affecting car buying decisions across every economic segment, even the wealthy. As such, dealers must consider new strategies and products to help consumers combat the affordability crises.