The Average Monthly New Car Payment Is Now More Than $700

Morning Dump Car Payment

The average new car payment blasts past the $700 mark, Porsche settles over emissions, Stellantis recalls some vehicles. All this and more in today’s issue of The Morning Dump.

Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.

Who Can Afford The Average New Car Payment?

car payment
Photo credit: yonkershonda licensed under CC BY-SA 2.0.

It’s no secret that the average new car transaction price has crept up during the pandemic, and as prices rise, so do loan payments. Cox Automotive and Moody’s Analytics just released their new vehicle affordability index for May, and the two firms state, “New-vehicle affordability in May is much worse than a year ago when prices were lower and incentives were higher.” So how much worse are we talking? Let’s break things down.

First, a quick word on how this new vehicle affordability index works, gleaning info from the official briefing. First, average new vehicle transaction price is amortized over a typical 72-month fixed-interest loan period, minus a 10 percent down payment. Lending rates from financing companies and credit unions are factored into this loan period to come up with a payment, then Moody’s compares the total of those payments to median household income. With that out of the way, let’s get to the big number – the average new car payment is now $712. More importantly, 41.3 weeks of household income are required to pay for the average new vehicle. Not individual income, household income. If this seems like an enormous jump over the past year or so, you’re absolutely right. According to the press release, “The estimated numbers of weeks of median income needed to purchase the average new vehicle in May was up 19 percent from last year.”

I won’t lie, I’ve bought whole cars for less than $712, so it’s a bit of a trip knowing the average new car buyer is shelling out $712 a month for six whole years. Granted, some of this could be skewed by availability – manufacturers are focusing on high-margin vehicles through this weird shortage of everything. However, it’s still a massive figure that seems to indicate affordability as something that’s slipping away. With future basis point hikes likely in store, new car affordability is probably going to get worse before it gets better. I mean come on, the average consumer has to hit a limit, right?

[Editor’s Note: I could buy a manual 4×4 Chevy Tracker literally every month. -DT]

Pagani Gets Weird

Pagani Huayra Codalunga
Photo credit: Pagani Automobili

Oh come on, who am I kidding? Pagani’s always been a bit weird. Seven-figure supercars made out of carbotanium with baroque interiors and screaming AMG V12s aren’t exactly normal by any stretch of the imagination. However, the new Huayra Codalunga takes Pagani’s weirdness to new heights, with an entirely new rear end reminiscent of old-school mid-engined race cars.

See, coda lunga is Italian for long tail, and the Huayra Codalunga’s tail is very long indeed. Honestly, I have mixed feelings on this one. The Codalunga is definitely less cohesive than a standard Huayra, but the new rear end is rather distinctive, and quite good on its own. See, the whole project is really a flex for Pagani’s Grandi Complicazioni special vehicles division, a proof of concept for what can truly be possible. As Pagani’s commercial director Hannes Zanon said in a statement,

“All Pagani products are born from visions and dreams, and some of the most iconic and exclusive Pagani cars stem from the vision and dreams of clients. In 2009, this led to one of the most iconic Zonda models, the Zonda Cinque. Pagani Automobili is capable of developing these bespoke projects for single clients, much like the Coachbuilders in the ‘60s, but in compliance with today’s international homologation requirements. Specifically, one of the five cars will be certified for the U.S. market.”

Honestly, if I had several clients with millions of dollars burning holes in their pockets who wanted something unique, I likely wouldn’t deny their requests either. According to Pagani, two customers commissioned this car, and only five units will be produced at a massive cost of €7 million each, or $7,332,325 at current conversion rates. While this is all well and good, I’m more interested in the next Pagani. See, the Zonda is a timeless piece of art, and the Huayra always felt like a bit of a caricature of the Zonda. Will Pagani make lightning strike again? Let’s wait and see.

Porsche Settles A Massive Lawsuit

Porsche 911 GT3 991.2
Photo credit: Porsche

Huh, looks like emissions and fuel economy tampering is back in the news. Who’d have thought? Yep, according to Reuters, Porsche has agreed to an $80 million settlement package over fuel economy and emissions test tampering on cars made between 2005 and 2020.

See, lawyers for Porsche owners claim that Porsche used taller axle ratios and special software to quietly boost fuel economy by one or two mpg and cut emissions in laboratory testing. The suit also alleges that Porsche new about inconsistencies in fuel economy data as early as 2015, but didn’t immediately report those findings to American regulators. As ever, it’s worth mentioning that a settlement isn’t an admission of guilt. Still, owners can expect to receive between $250 and $1,109 per vehicle, so long as a federal judge approves the agreed-upon settlement terms. Oh, and owners of cars with Sport Plus mode can expect an addition $250 and a software fix because Sport Plus mode caused vehicles to run afoul of emissions requirements. Honestly, I don’t see a huge issue with that last issue. It’s so rare for cars to be run in Sport Plus mode, so the impact seems negligible at best.

Stellantis Recalls More Than A Quarter Of A Million Vehicles

2017 Ram 1500 Laramie Crew Cab 4x4 Ecodiesel
Photo credit: Ram

Last up on The Morning Dump, a bit of recall news. Stellantis has issued two recalls, one for high-pressure fuel pump failure and one for backup camera issues. Combined, these recalls affect 256,404 U.S. market vehicles and hundreds of thousands more worldwide. Let’s break down these potential breakdowns.

First up, a massive recall for anything equipped with the second-generation EcoDiesel V6. According to recall documents, a flawed high pressure fuel pump (HPFP) design was used on this engine until late 2019, and these pumps can have a particularly destructive failure mode. Straight from the NHTSA report, “A HPFP failure may introduce internally failed component debris into the fuel system potentially causing fuel starvation.” Now, when a vehicle suffers from fuel starvation, a few things can happen. Not only might the engine run lean, but it may shut off entirely. More importantly, HPFP debris is a pain to clean up – just ask anyone who’s owned a BMW with an N54 turbocharged inline-six.

The bad pumps were found on 2014 to 2020 Jeep Grand Cherokee SUVs and 2014 to 2019 Ram 1500 pickup truck in the U.S. market, along with several commercial vehicles abroad. As such, Automotive News reports that 138,645 American-market vehicles, 55,711 Canadian vehicles, and 188,178 vehicles in other markets are affected by this particular recall. According to the recall report, “FCA US will conduct a voluntary safety recall on all affected vehicles to replace the HPFP, and inspect and, if necessary, replace additional fuel system components.” Expect owner notification letters to arrive around July 29. In addition, owners who’ve gone through the ordeal of HPFP failure will be compensated for repairs, so long as they can provide receipts to FCA US.

Secondly, 2022 Ram pickup trucks are reportedly having backup camera issues. According to the NHTSA recall report, “The vehicle operator will notice that the rearview image is not displayed if attempting to reference the image while backing.” Translation: you might not see a damn thing that’s directly behind your Ram pickup truck. Since accidentally reversing over people is bad, 117,759 American-market trucks have been recalled and are expected to receive a software update to fix this issue. Automotive News reports that 4,576 Canadian trucks and 240 trucks in other countries are similarly affected, not massive numbers but not insignificant ones either.

The Flush

Whelp, time to drop the lid on today’s edition of The Morning Dump. Happy Friday, everyone! The weekend is almost here. With that in mind, I’d love to hear what fun automotive things you have planned. Whether you’re swapping an engine, watching the Montreal Grand Prix, or simply going for a drive to get some ice cream, car time is generally a good time.

Lead photo credit: “Row of Cars at a Car Dealership” by everycar_listed_photos is marked with CC BY-SA 2.0.

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58 Responses

  1. Reading the Cox / Moody’s page on how they created the affordability matrix shows they are committing one of the most deadly sins of statistics – mixing median with mean. They are using the mean vehicle transaction price but the median household income.

    The mean family income (from the St. Louis Fed) was $114,962 in 2020. The median household income was $67,521. This makes a HUGE difference when you are calculating how many months of income it takes to pay the loan.

  2. “ Editor’s Note: I could buy a manual 4×4 Chevy Tracker literally every month. -DT]”
    Am I the only one who loves this new monetary unit? Instead of dollars, I’m going to quantify prices as Chevy Trackers. “Hey lunch was 0.01 Chevy Trackers” or “my mortgage is 2.5 Chevy Trackers”…

    1. it is cool watching those old cars roll around the cities heading to the show…i had to laugh this morning when i saw what had to be grandpa in his really old car with his grandson standing on the rear seat, pacing back and forth while the car was driving down 694…good times

        1. Your contention is that someone making the average salary (~$60K or so) should expect to have an average house ($375,000) and an average new car ($50,000)?

          Most people I know that make $60K rent, and drive a decade old car. Most people I know with $375,000 houses and brand new cars make several multiples of the average income. Your numbers aren’t comparing the same set of people.

    1. My car payment $0 for the last15 years
      My mortgage $250 a month on a 15 year mortgage.
      Does anyone realize if idiots didn’t agree to payment and terms it wouldn’t be that high. And it’s their fault for begging for the loan.

  3. One element to also factor into the higher average car price per month is EV/PHEV sales. These cars cost more but then the user makes up some of that cost in gas savings, depending on how much you drive, you could easily save $200-$300 a month in gasoline if switching to an EV, even when you factor in the cost of electricity.

    Likewise if your income is high enough to take full advantage of the tax credit, that $7,500 that you don’t get taxed spread out over each month over 60 months is $125.

    So with an EV you might be paying $800 a month, but in reality tax credits and gas savings included your total cost of ownership per month would be more like $375-$475.

    1. Yup. This is me. I could have bought a ho-hum daily driver ICE car or a semi luxury EV for the same out of pocket cost monthly. I ending up buying a Polestar 2 with the performance pack. Ya my payment is $700/month but it saves me at least $400 month in fuel. Right now with crazy high gas it’s like $600/month savings.

    2. Note: should have worded that as effective car payment of $375-$475.

      Basically when you factor in cost of fuel and tax credit, a $375-$475 petrol car could have around the same total cost as a $800 EV depending on driving habits.

  4. This weekend’s automotive activities have a 50/50 chance of either being a) go test drive some cars while lamenting not having jumped on a good deal six months ago or b) decide we’re just going to stick it out until the ID buzz goes on sale and try to be as close to the front of the line as possible. That’s the car we actually want and have been waiting for what feels like decades.

    Given that there are a small handful of what look like clapped out but not too clapped out shitboxes around for less than some of the market adjustments I’ve seen, option c might be grab one and hope it lasts the twelve to eighteen months on fluids alone until the Buzz gets here.

  5. I finally signed up for an account, just to comment on this.

    I wonder what the monthly car *insurance* payment is on this $712/month average car. $200-300/month, maybe? So Jane Average is spending a grand a month on that new car, before paying for fuel and maintenance? Ouch! I’m glad I have a cash-purchased old pickup with $50/month insurance. It makes the $150 fuel fillups a lot easier to stomach.

    1. My insurance prices never seem to change much, regardless of the price of the vehicle. I’m paying within $100 every 6 months a 14 year old car worth about $5000 and a 2021 RAM 1500. I was ready to drop collision off the 2008 STS, but then the value went up to the point where it didn’t make sense. I would have saved about $260 a year to drop collision, but I have 2 teen drivers and that’s their car to share. Chances are the thing is going to get totaled at some point, because any collision is going to total it, so $260 seems like a good annual rate to at least have something to put toward a different car and the increased rates if they get in an accident.

      Prior to the Ram, I hadn’t bought a new car since 2008 (I usually get something 3 years old and drive it for 5-6 years), but it made no sense to buy a 2-3 year old truck last year, because I only paid about $2,000 more for a new one than a 2 year old one with 20,000-30,000 miles was going for.

      1. Unless you have something really exotic, I think these days your insurance rate is more protection against six figure medical bills in the event you hurt someone in an accident. The value of the vehicle is almost a rounding error.

        What does hurt with a new, expensive car is the registration, at least where I live. Registration on my older cars is a flat $35 a year, registration on a new truck would probably be somewhere in the $750 a year range these days.

    2. I just went from 18 year old Mazda wagon to a new Polestar 2 that’s worth literally worth 15x more. My insurance went up $10/month. I think it’s around $80/month for the new car. We have a few cars on the policy so note sure off the top of my head how it breaks down.

  6. Generally I’m not a big Pagani fan but cripes the tail of that thing is gorgeous.

    No real automotive plans this weekend. Drive about 4 hours one way to see Dad for Father’s Day, hopefully have a friend pick up an engine for me.

  7. “First, average new vehicle transaction price is amortized over a typical 72-month fixed-interest loan period, minus a 10 percent down payment.”

    Hold on, so they’re not even looking at actual loan data, they’re just doing some math on the average new car price? If people are smart and put more than 10 percent down the real average car payment could be significantly lower than what they’re stating.

    I’m sure payments are up with the increase in car prices, but this methodology seems designed to generate headline-grabbing numbers more than provide any real insight into the car loan market.

    1. I agree that looking at actual loan data would be better and more interesting, but given the current epidemic of dealer fees and market adjustments we’re seeing, plus the difficulty of people to cover the cost of vehicles (see increase in loan terms and fleet age, plus general availability of no-money-down offers) and my expectation is that 10% down on the retail price of cars sold is actually well understating the real picture.

      It’s all well and good to decree that it’s smart to borrow less, but given the general precarity of many situations (plus that 41 weeks of income figure) and the fact that many people need reliable transportation regardless of whether it’s fiscally smart in the long term, clucking at desperate people for being desperate is missing the point.

      1. Desperate people aren’t buying $40k+ new cars with $700+ payments per month, but that’s kind of missing my point. I’m saying we don’t know what people are actually paying on their loans because they used a made up number instead of actual loan amounts. Maybe everyone is financing with 0 down and the number is actually worse. Maybe everyone is putting 50% down and the number is much better. We don’t know, and that makes this pretty useless.

    2. “If people are smart and put more than 10 percent down”

      What? Car loans have some of the lowest interest rates of any loan normally around 0% to 3%.

      The smart people put as little down as possible and instead have that money in investments that make more than 0% to 3% in return.

      Say you bought a 50k car with 0% down and 1.5% APR for 60 months
      You pay $1,929.40 in interest across 5 years.

      You buy that same 50k car with 10% down and 1.5% APR for 60 months.
      You pay $1,736.40 in interest across 5 years.

      So by paying $5k upfront you save $193 across 5 years in interest.

      Lets say instead you put that $5k in an investment, like say an index fund like S&P 500 that benchmarks around 10% per year.

      That $5,000 would be worth $7,518 after 5 years, so you earned $2,518 by not putting that $5k down and using it as investment instead.

      So you made $2,518 but had to pay $193 more in interest in those 5 years, still leaving you $2,325 ahead than if you did the “smart” thing and put 10% down.

      Take the free or almost free money every time.

      1. If you’re buying a new car, you’re not making the smart financial decision whether you invest borrowed money in the stock market or not.

        However in your case you made know acknowledgement of the risk of your scheme. Do you understand that there is one?

        The person you’re lecturing will have paid exactly what they expected to pay. You will either be ahead or way behind. Could go either way. Odds are decent you’ll be OK, but over a short 3 year period your index fund could easily be way down at the end.

        1. With any investment there is risk. You can mitigate these risks, but there is always the chance of things going horribly wrong. With that said I used S&P 500 because while it has its ups and downs it generally benchmarks around 10% up on average over a long period of time.

          A more risk adverse investor could put that money in bonds instead. I believe the 5 year rate of return right now is 3.35% on treasury bonds. That is a risk free investment that would still bring you out ahead of most typical auto loans, though not by much.

          And yes buying a new car is not a smart economic decision, buying any depreciating asset is a bad decision on a purely economic front, so that further justifies putting the least amount into it upfront and let that money work for you elsewhere. It just loses value in the depreciating asset.

          As for not buying a new car, well that is how all the fun and interesting cars die. When everyone wants to buy their brown manual wagons used for someone else to take the hit, nobody else does and then there are no brown manual wagons new or used.

          1. A car loan is not a long period of time. You can find plenty of examples of car-loan length periods that the S&P is down over.

            3.35% is not enough to justify borrowing to invest. Why? Because you’ll pay more than 3.35% just on gap insurance. You bought gap insurance, right? Wouldn’t want to borrow money to invest and then get into a wreck and not have the money when the bank calls in your loan in a down market….

            Face facts: borrowing to invest is generally terrible financial advice unless you’re already wealthy and savvy enough that you wouldn’t be using an auto loan as the source of capital.

            1. Well said. The market right now is a perfect example of why you probably shouldn’t do this. Even bonds haven’t been safe – the ones I bought a year ago are down something like 10% right now, which means if I needed them to pay off a car loan I’d be losing money even if the loan was 0%. Even modern 84 month car loans just aren’t long enough to be a slam dunk investment.

  8. I’m one of those $700/month car payment people but my actual cost is a lot less. I recently purchased a Polestar 2 EV. It was ~55k OTD. The thing is it saves me ~$400 in fuel costs. I figured for what it would cost me to get a run of the mill ICE car I could get something much nicer for the same money.

  9. “I’d love to hear what fun automotive things you have planned”

    My club’s TROG car was invite to Eyes on Design at the Edsel Ford Mansion this past weekend. I spear-headed to the effort since I was the current caretaker. It was a great day of hobnobbing and making some noise during a typically reserved lawn show.

  10. This is how you drive inflation. Force interest rates low, teach people that the payment matters more than the price, and let banks issue loans to people who really can’t afford them based on the payment alone.

    You might think it’ll be OK as long as we don’t bail the banks out later when they have trillions in loans backed by broken down old cars. But A) We _will_ bail the banks out and B) when people can afford $500/month for a car payment and you bring payments down with low interest the cost of everything in the supply chain increases to the point where no money is left on the table. Every time.

    The war and pandemic are economic sideshows. Stimulus is the economic shotgun we have pointed at our feet.

    Prices aren’t going to come back down. Payments are going to double or quadruple as interest rates go up. Some automakers are going to go out of business and many many many people are going to lose their auto-industry jobs. Book it. We did this to ourselves when we voted.

  11. Yara is absolutely correct on financial front, as a long term banker it’s frustrating when folks just don’t get the math. That said, it’s more a matter of discipline than logic for many.

    Back to the 50’s is the highlight of my spectating year, always incredible.

    Going to take a long open air ride in my old SL600 then later on my V7 on the twisties.

    Tomorrow going to see about welding up a fender for MPW.

    I swear I’m going to try really really hard NOT to buy another project this weekend… wish I could blame my illness on DT, but sadly it’s been an issue for many years before I started following his exploits.

  12. I’ve never had a car payment.
    Never taken any of my cars to a mechanic either.
    I guess growing up “depression era” poor (youngest of seven, single mother poor) taught me a thing or two.
    If we wanted something we couldn’t afford we worked and saved up for it.

    Saving up for a big expense like a car takes time so you’ve gotta keep the one you’ve got going. (That teaches you the importance of maintenance).

    Paying a mechanic to have all the fun eats away at the saving, leading to longer maintaining. (That teaches you wrenching).

    Having to wait a number of years before you can get that thing you think you want so bad teaches you to be patient, pragmatic and to do your research.

    That’s the shitbox lifestyle. I don’t have the greatest cars, but boy do I appreciate what I have.

    As for weekend car activities..
    Gonna park my Prizm in the shade of a Hawthorn tree and give it a few coats of wax. So it’s 22 year old, pine green paint can continue to look respectable for years to come.

    Hell, $700 that’s a half day at DirtFish. I think I’ll save up for that next month instead.

  13. 1) change oil
    2) swap #1 coil with #2 to see if misfire follows the coil
    3) drive almost 2 hours southwest on the chance that I can catch the owner of a Chevette at home. I’m looking for a lightweight rwd domestic shitbox to dump dollars into with the goal of turning laps at a Lemons race, and this one–spotted Monday on my way to a nearby cell-site–looks good: no tag, but hasn’t been parked there for more than a couple years. I’d prefer a Pinto or even a Vega, but a ‘vette would suffice.

  14. “[Editor’s Note: I could buy a manual 4×4 Chevy Tracker literally every month. -DT]”

    It might be less expensive for David to do this and throw each “new” Tracker off a cliff than it is for him to continue his current car buying habits.

  15. I have a shitty e46 as a daily driver. Whenever I go out to lunch with a coworker with a new car, I get a little jealous and start looking at new cars. And I always stop when I get to the monthly payment area. Yikes. And that’s for an entry level, bare-bones Civic.

    Gonna drive this heap until I can’t anymore.

  16. [Editor’s Note: I could buy a manual 4×4 Chevy Tracker literally every month. -DT]

    You could, but should you 🙂

    Average car payments are hard to factor. Combine the two car payments I have and it is less than 700.

    It is really matter of what you buy. If you go for the Luxury cruiser, fully optioned truck, or look at me mobile, then yeah $700 is expect and more.

    At the same time, it is managing your money. Something people are generally not good at. My parents are very good at it and when they wanted to splurge on a Luxury car to take on cross-country trips, that had the means to do so. The payments are higher than $700. That is the reward for being good with money.

    When I chose my luxury cruiser, I found a good deal on an off-lease car that was less than what a Honda Civic was new. I made sure we had the funds and pulled the trigger.

    I also take the approach of “I have enough problems then worrying about your car payment”. I keep my house in order and let others do what they will. If you want to put yourself in the poor house to have latest shiny, that is your problem not mine.

  17. The Reuters article says Porsche owners with the sport plus only get the extra payment if they get the software update. Which probably makes it a sport minus button. I like the way it works now thanks. Not sure second owners even qualify, unless I win the lottery, I will always let someone else take the depreciation hit on cars from Zuffenhausen.

  18. I’m going to drive my ’76 BMW up into the mountains. I and my trusty dog will hike to a waterfall where we will splash gleefully in the cold water. A beer will be retrieved from a backpack, cooled in the stream and drunk with gusto.

  19. My grandpa called it going ‘grump’. Every once in awhile, could you call it The Morning Grump? Yes, Jason would need to make another graphic, but I think it would be worth it. 😀

  20. The big automotive activity I have planned for this holiday weekend to take my kids on a little road trip to see two of the houses I grew up in – I’m hoping the current owners will be around and offer to let us see my old bedrooms!

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