‘Your Wallet’: Lincoln experts offer car buying tips as monthly payments top $1,000 for many

LINCOLN, Neb. (KLKN) – Despite cooling inflation and a pause on interest rate hikes, consumers are still feeling the impact of high prices, especially when car shopping.

Nearly one-fifth of new car buyers are paying more than $1,000 for monthly payments.

That’s an all-time high, according to financial adviser Tim Kulhanek with Stonebridge Insurance and Wealth Management.

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Kulhanek said monthly payments have risen significantly in the last few years because of inflation, high interest rates and supply chain backlogs.

He said that during the COVID-19 pandemic, many car lots “spaced the cars out because they didn’t have any inventory.”

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Right now, the average monthly car payment in the U.S. is about $730, according to data from Edmunds, an online vehicle shopping guide.

The data also show that more than 17% of car buyers are paying over $1,000 a month for a new car, up nearly 5 percentage points from a year ago.

The Federal Reserve is also signaling that it will resume interest rates increases, meaning car payments will likely get more expensive.

“Now is a pretty rough time to buy a new vehicle,” Kulhanek said. “And what ends up happening is a lot of people end up with what we call negative equity; they owe more than the car is worth. Because as soon as you drive that car off the lot, what happens? The value goes down.”

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At Winners Circle Auto Center in Lincoln, assistant manager Tyler Wilson said now is a good time for trade-ins.

“Trade values are much higher now than they have been in the past three or four months, so that’s a positive thing,” he said. “If you’re looking to get more out of your trade, right now would be a great time to do so.”

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Wilson and Kulhanek have some advice if you are planning to buy a new or used car.

First, make sure you can afford the total cost of the vehicle, including interest, over the length of your payments.

Kulhanek said that in the first quarter of this year, 36% of car loans had 67-to-72-month terms.

And with such high interest rates, you could end up spending thousands more than a car is worth.

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The two also said it might be a good idea to wait awhile before buying a new car if you can.

Instead, bide your time and save up some money for when prices and interest rates eventually go down.

“You have to be willing to delay gratification,” Kulhanek said. “Car lots are there to sell you a vehicle — that’s their job — and not necessarily sell you the vehicle you want but sell you the vehicles they have.”

He said to avoid overpaying, do a lot of research of both car lots and banks, and get pre-approved for a loan.

Editor’s note: This report is part of a weekly series Channel 8 is airing called “Your Wallet.” We’ll be looking into any topics that deal with your money. The reports air every Monday during the Channel 8 News at 6 p.m.