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According to Automotive News, interest rates are down although affordability is still an issue when it comes to the auto retail industry.
The average interest rate for a new car dropped to 6.8 percent in the fourth quarter of 2024, down from 7.4 percent a year prior. Despite this, new-car buyers in the fourth quarter faced an average monthly payment of $754, an increase from $739 a year earlier, according to Edmunds.
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On Dec. 18, the Federal Reserve cut its benchmark rate target by 0.25 points, bringing the federal funds rate target to 4.25 to 4.5 percent. These adjustments to the benchmark rate can influence the interest rates auto lenders charge consumers, CBS News said.
Potential tariffs on Canada and Mexico could also impact vehicle affordability, though the outcome of these policies remains uncertain.
Despite these challenges, pent-up demand for cars remains strong. In December, auto lender Santander surveyed roughly 2,200 Americans earning between $50,000 and $148,000 a year as part of its quarterly Paths to Prosperity study.
Forty-five percent of respondents indicated they are considering buying a vehicle in 2025, while 52 percent said they delayed purchasing a car in 2024 due to cost concerns, The Truth About Cars said.
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