How Do Interest Rates Impact Used Car Affordability?

Interest rates play a crucial role in shaping the true cost of a used car. The more expensive the car, and the higher the rate, the more expensive the monthly payment will be. But by how much? CoPilot analyzed national pricing data to uncover the impact of interest rates on used car affordability.

Your Monthly Payments

First, let’s zoom in on the correlation between interest rates and monthly payments for gasoline-powered cars. This isn’t just a numerical breakdown; it’s a practical guide for understanding how credit scores impact your monthly financial commitment. For those with better credit (superprime), lower monthly payments are attainable, making higher-priced cars more accessible. Conversely, for those in the deep subprime category, affordability becomes more challenging, especially for pricier vehicles like the Porsche Cayenne. 

Assess your credit score against the used car price buckets and their monthly payments to identify the most cost-effective path based on your financial standing. Consider opting for a more affordable vehicle or working on improving your credit score if the monthly payments are too high.

Total Price Paid

Not only do interest rates impact monthly payments, but they directly influence the total amount paid over the life of a loan. Carefully consider your interest rate, as even a small percentage difference can lead to a substantial difference in the final cost of the vehicle. Look at how much the total cost of a used Hyundai Palisade changes with just a slight increase in interest rate!

As you review the impact that interest rates and vehicle prices present across this table, the importance of credit scores becomes even more pronounced. But the road is not only defined by interest rates! Negotiation, dealer markdowns, and the current market dynamics all contribute to the total cost equation. Preparing ahead of time with market prices, vehicle comps, and pre-approved financing will all help to set you up for success in negotiation.