Car prices dip after average monthly payment hits record $777

The average monthly payment for a new car loan hit a record $777 in December 2022, according to Cox Automotive.

Higher interest rates and an average transaction price (ATP) of $49,507 were behind the increase, which was up 2.1% from November.

The cost pushed the number of weeks a typical American needs to work to pay off their car from 43.3 to 44.

"January is always a very light month for sales transactions, so I am not drawing any conclusions from the data we have seen so far other than to say the market’s biggest problem is affordability driven by the high level of interest rates," Cox Automotive chief economist Jonathan Smoke said last month.

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Buyers saw some relief in January, however, as the ATP fell slightly to $49,388, a 0.6% drop from the month prior.

"The transaction data from January indicates that overall prices are no longer increasing like they were a year ago," said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive.

"Both luxury and non-luxury prices were down month over month, but the mix of luxury vehicle sales last month – at a record high near 20% – helped keep the overall average price elevated."

Tesla helped drive the market downward with large cuts that saw the ATP for electric vehicles fall 5.4% to $58,725, while improving inventories helped stabilize prices across the board.

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Automakers also increased incentive spending from 2.7% to 2.8% of the ATP in January, which is still down from the historical pre-new vehicle shortage of 8.6%.

Luxury brands offered the highest average discounts, however, at 6.2%.

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An updated estimate on how the change affect monthly payments is not yet available.