SOUTHFIELD, Mich. (WXYZ) — How much are you willing to spend for a new ride? According to the car shopping site Edmunds, the amount of people paying more than $1,000 monthly for a new vehicle has reached record highs.
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One in five: that's how many people Edmunds says have committed to at least $1,000 on a car payment during the second quarter of this year. While some budgets can handle that type of spending, a financial expert says others should consider their options.
Joy Fugghett says buying a new car has crossed her mind recently, but there are factors that have kept her from following through.
"They all want like $800-$1000 a month for a new car, so I figured I'd keep mine," Joy explained to me.
That's why she was shocked to hear recent analysis from Edmunds, revealing that 19.3 percent of new car buyers have agreed to monthly payments of $1,000 or more during this year's second quarter, compared to 17.7 percent in quarter one.
"That's rent prices," Joy said. "Like, you pay that much for a one-bedroom, so paying that much for a car is insane, and you still have to get insurance."
Rick Bloom is a financial planner and President of Bloom Advisors. He says those high car payments are a result of the current market.
"If you look at the average car price, it's over $40,000 for a car and people are financing a great majority of the purchase," Rick said. "And then you look where interest rates are, we're talking about the average car loan now being seven percent. That's how you get to the $1,000."
To help bring down costs, he has a few tips. Bloom says there's been a trend of people putting less money down for a car, but in reality, they should put more down."
"Just like when you buy a house, a general rule is you want to be able to put 20 percent down," Rick said. "Well, you need to at least do that for a car, so if you put more money down, you're going to pay less interest."
He also suggests that drivers take a look at used vehicles.
"You can get some gently used cars, still on warranty, that are very good prices," Rick said.
To decrease monthly payments, Edmunds shares that more people are choosing seven-year loan terms. But that may not always be the best idea.
"If you hold a car for seven years, you're going to need a car at the end. At least if you pay it over five years, you can have it for a few years where you don't have that car payment," Rick said.
And Bloom says it's crucial to take control of your finances.
"By having your financial house in order, it allows you to sleep better at night," Rick said.
"I'm also told that people should shop around for car loans to find the best deal.
