Economists suggest that the Fed may continue to reduce interest rates by up to 2% in total through late 2024 and 2025. These potential future cuts could bring about even better refinancing terms for borrowers with strong credit.
According to the CPI (Consumer Price Index), the cost of insuring a car in the U.S. rose by 1.6% in December 2023, up 20% from the year prior (compared with broad-based CPI up 3.4%) and up nearly 37% over the preceding two years, the sharpest two-year increase since 1977.
Used car prices have likely peaked, but new car prices are expected to remain high. In 2023, prices are expected to decline by roughly 10% for used cars and by 2.5% to 5% for new cars.
A high interest rate on a car loan is one that's above the national average. In the second quarter of 2024, the average rate was 6.84% for new cars and 12.01% for used cars, according to Experian's State of the Automotive Finance Market report.
Even people with good credit scores make mistakes, and a bank may charge a penalty APR on your credit card without placing a negative mark on your credit report. Penalty APRs typically increase credit card interest rates significantly due to a late, returned or missed payment.
Experts say that 2024 will be the best year to purchase a new car since 2019. As interest rates slowly drop throughout the remainder of the year, payments will become more manageable. Don't overlook manufacturer rate promotions, as they can save you thousands of dollars.
Key Takeaways:
Car prices are expected to decrease in 2024 due to increased production of new vehicles and stabilizing supply chains, making it an advantageous time for both new and used car buyers.
The latest data from Cox Automotive shows that new car transaction prices continue to fall, and with more affordable new cars, the used car market is under downward pressure. All signs point towards more price drops to come in 2024 (see our market forecast here). But it's not all good news.
Geico has some of the lowest rates in the industry for full coverage car insurance, even for drivers with bad credit, speeding tickets, accidents and other risk factors. And unlike other affordable options like USAA and Auto-Owners, Geico is available in all 50 states.
States Where Age Does Not Affect Rates
In the following states, insurance companies cannot take age into account when calculating insurance premiums: California.
"We have newer cars sometimes that have some components that we haven't had so much in the past," Laucher said. "Electric cars -- they have been production issues." Post-pandemic factors are also playing a role as insurance companies are feeling the impact with a higher volume of traffic compared to several years ago.
So in 2025, expect modest declines in rates for mortgages, auto loans and credit cards, according to Bankrate's chief financial analyst Greg McBride. “Even with those declines, we're not going back to a low-rate environment,” McBride said. “We're going from a high-rate environment to not as high.
The lowest auto loan rate in 2024 was 7.41 percent for a four-year used car loan in late October. Bankrate's expert predicts that by the end of 2025, five-year new car loan rates will reach an average of 7.0 percent and four-year used car loans, 7.75 percent.
The Best Months: September, October, and December
This is an excellent time to find deals on cars that are still brand new but may not have the latest features. December: December is arguably the best month to buy a car.
A trend in wholesale prices tends to become a trend in retail prices after about six to eight weeks. Dealers paid slightly more for the average used car in late 2024, meaning mild price increases are probably on the way for early 2025. That's become a common story. It's also governed by supply and demand.
Mondays. Monday can be the best day of the week to buy a new car. Other potential shoppers are often at work, so representatives at car dealerships are focused on anyone who comes in the door.
A high APR for a credit card is one that's above the national average. Currently, the average APR is around 25%, so an APR that exceeds that is considered high.