Ultimately, the best time to buy a car is when you need one. But if you can wait, you may be able to benefit from lower prices and interest rates in 2025. Just don't expect huge savings.
MBA: Rates Will Stay Above 6.3% in 2025. The Mortgage Bankers Association predicts in its Mortgage Finance Forecast that mortgage rates will gradually slide from 6.6% at the beginning of 2025 to 6.3% throughout 2026.
According to BlackRock's analysts , in 2025, the Fed will likely reduce rates further to around 4% and then pause, depending on inflation and labor market data. BlackRock highlighted the Fed's Summary of Economic Projections (SEP) , which suggests a potential range for the federal funds rate between 3.75% and 4%.
This is in contrast to last year when borrowers were met with climbing interest rates driven by the four rate hikes in 2023. As of late 2024, the Fed has lowered rates three times, which will help to continue bringing rates down into 2025.
Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
Expert Projections of Interest Rates in the Next Few Years
Louis Fed, interest rates in the coming years are expected to be: 2025: 3.4% 2026: 2.9% 2027: 2.9% (according to Federal Reserve Bank members and presidents, the median projection for rates after 2026 is 2.8% with a range of 2.4% to 4.9%)
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023 before descending somewhat in 2024. Many experts and industry authorities believe they will follow a downward trajectory into 2025. Whatever happens, interest rates are still below historical averages.
Five-year new car loan rates are projected to fall to 7% from 7.53%. But McBride warned that, “That isn't going to make an unaffordable car affordable.” Bankrate said new vehicle prices have surged about 20% since early 2020, while used vehicles went up almost 25%.
UK interest rates will fall “four times” or more in 2025 -- to at least 3.75% by the end of the year. A majority of economists made this two-fold forecast before UK long-term borrowing yesterday crept up to its highest level since 1998.
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
December: December is arguably the best month to buy a car. Dealerships are trying to hit their year-end sales quotas, and salespeople are often more motivated to offer better deals to meet these targets. The closer you get to the end of the month, the better the deals tend to be.
Driverless Vehicles Will Be the Future of Connected Cars
2025 will also see the automotive industry moving from Level 2 autonomy to Levels 2.5 and 3, representing a significant evolution in automotive technology and enhancing vehicle automation and safety.
Looking ahead to 2025, we expect to see more of these financing and cash offers and even stronger lease deals, as automakers work to maintain sales momentum. MSRPs are unlikely to fall, but the average new car selling price will drop due to big incentives. This is highly likely for the new cars with the most inventory.
Though mortgage rates have fallen from their 8% peaks, the decline has been slow and gradual. Over the past 12 months, the average 30-year fixed mortgage rate has fluctuated between 6.5% and 7.5%. Most housing economists had expected mortgage rates to drop to 6% by the end of 2024, moving into the mid-5% range in 2025.
In fact, in March, Fed Chair Jerome Powell remarked that interest rates "will not go back down to the very low levels that we saw" during the financial crisis, suggesting that the economy can adapt to a more "neutral" benchmark rate range of between 2.4% to 3.8% in the long run, i.e., less tightening, but not too much ...
Will Mortgage Interest Rates Go Down in 2025? A return to the historically low home interest rates seen from 2015 to 2021 is pretty unlikely within the next 5-10 years, but that doesn't mean we're anticipating them to skyrocket either.
Oxford Economics is predicitng that base rate will eventually fall to 2.5 per cent in 2027 where it will broadly remain throughout 2028 and 2029.
Mortgage points, also called discount points, lower your interest rate for the life of the mortgage. A lender may allow borrowers to purchase as little as a fraction of a point or up to four points. One mortgage point typically costs 1% of your loan and permanently lowers your interest rate by about 0.25%.
Key takeaways. The Federal Reserve is expected to lower rates by at least 100 basis points through the end of 2024. As such, primary mortgage rates could fall by as much as 60 bps over the next year — and by even more if the rates market begins to price in more cuts than are currently expected.
How much would a $30,000 car cost per month? This all depends on the sales tax, the down payment, the interest rate and the length of the loan. But just as a ballpark estimate, assuming $3,000 down, an interest rate of 5.8% and a 60-month loan, the monthly payment would be about $520.