The average new-vehicle loan in January 2022 charged 4.1 percent interest, according to J.D. Power. Last month, the average new-vehicle borrower accepted a 6.8 percent annual percentage rate.
Castriota said most highly creditworthy customers faced APRs of 5-6 percent, and those with marginal credit are nearly into double-digit rates.
“Every consumer that’s borrowing is paying more,” he said.
Jack Schmidt, principal of Jack Schmidt and Associates who has a financial role at Adventure Subaru of Painesville, Ohio, called affordability and inflation concerns but didn’t view higher interest rates as a top challenge for 2023.
“That’s just an excuse not to sell a car,” Schmidt said.
Sixty-four percent of retailers polled in a different Automotive News Dealer Outlook Survey question thought higher interest rates would reduce consumer new-vehicle demand, and 53 percent said used-vehicle demand would fall.
Smaller but still significant percentages of dealers anticipated interest rates would cause headaches for their F&I staff. Forty percent thought F&I staff would sell fewer products per deal compared with 2022 because of the interest rate environment. More than 1 in 4 dealers — 28 percent — said they would be forced to reduce reserve below 2022 levels to close sales.
