February average ARPs remain stable as retail prices climb again

As purchase preferences continue to skew toward SUVs and trucks, pushing average prices higher, Edmunds noticed what those buyers are being charged to finance that acquisition remained stable in February.

Edmunds reported on Tuesday the average interest rate for new-vehicle financing stayed below 6% for the eighth month in a row. The annual percentage rate (APR) on new financed vehicles averaged 5.6% in February, compared to 6.3% in 2019 and 5% five years ago.

Edmunds data revealed that the share of sales with 0% finance deals stayed flat at 3.6% in February, unchanged from January.

“Interest rates on new cars are in a really stable place right now,” Edmunds executive director of insights Jessica Caldwell said in a news release.

“February is a slower month for auto sales, so shoppers heading to the dealership at this time of year are probably not going to find much in the way of big promotional offers, but they’re definitely getting better interest rates than if they tried shopping at this time just a year ago,” Caldwell continued.

For used-vehicle financing, Edmunds indicated the average APR came in at 8.3% in February, edging slightly higher from January (8.2%) but softening from a year ago (9.0%).

The stable financing metrics should be good news for dealerships and finance companies that are continuing to work customers who are taking on more debt to finance higher-priced vehicles.

In the new-car space, TrueCar and its data and analytics subsidiary, ALG, projected February average transaction prices (ATP) to be up 2.0% or $701 from a year ago and 1.0% or $360 lower compared to January.

“Average transaction prices have increased for 51 consecutive months. This is likely due to the healthy economy and consumers opting for utility vehicles with generally higher price tags,” said Eric Lyman, chief industry analyst for ALG, a subsidiary of TrueCar.

“That being said, there are still plenty of new vehicles for consumers to choose from that are not only affordable, but also offer the latest safety and technology features. Brands such as Kia, Nissan, Hyundai and Honda all have average transaction prices below $30,000,” Lyman continued in a news release.

Nick Woolard, director of OEM and affinity partner analytics at TrueCar, explained which OEM influenced the firm’s data most in February.

“Hyundai has shown the biggest increase in average transaction price this month primarily due to sales of the Palisade, their popular three-row SUV, which has almost twice the average transaction price of other vehicles in Hyundai’s portfolio,” Woolard said. “The all-new Sonata, winner of ALG’s best vehicle redesign of 2020, is also piquing the interest of consumers looking for a Hyundai at a lower price point.”

The valuation analysts at Kelley Blue Book reported the estimated average transaction price for a light vehicle in the United States was $37,876 in February. They determined new-vehicle prices increased $975 or 2.6% from February of last year while falling $126 or 0.3% compared to the previous month.  

“Many of the major manufacturers increased prices by more than 4% by capitalizing on the shift toward SUVs. However, trucks, especially full-size trucks, are exhibiting weakness,”, for Kelley Blue Book analyst Tim Fleming said in a news release.

“After prices climbed 3% in 2018 and 4% in 2019, truck prices are only flat through February 2020,” Fleming continued. “With the GM and Ram trucks in their second year of production and Ford about to sell-down the current F-150 for its upcoming redesign, this year may be a good time to find a deal on a new truck.”

What can constitute a deal for consumers is how much money OEMs slap on hoods. ALG spotted judicious incentive use in February.

Analysts indicated average automaker incentive spend in February is expected to reach $3,576, up 0.2% or $8 year-over-year but down 4.2% or $158 month-over-month.

ALG calculated that incentive spending as a percentage of ATP for the industry in February is expected to be 10.1%, down 1.8% from a year ago and down 3.3% from January.

New-Car Finance Data

Used-Car Finance Data

Source: Edmunds