By Ben LuthiWhat Is the Average Price for a New Car?
Due to the coronavirus pandemic, many auto manufacturers were forced to temporarily shut down or scale back production, so new car inventory for the 2021 model year may not be as robust as it would have been. Ongoing supply challenges are likely a factor in the average cost of a new car climbing to $38,723 as of September 2020, according to Kelley Blue Book (KBB), up 2.5% from the same month the year prior.
If you're in the market for a new car, you may be trying to determine how much it'll cost to make sure the purchase fits in your budget. The actual price you pay, though, will depend on the make and model you're hoping to buy. If you're financing the car, you'll also want to look into average interest rates, so you'll be able to determine the total cost of your purchase. Here's what you need to know.
Average New Car Price by Vehicle Segment
Depending on the type of vehicle you want to buy, the average price can vary greatly. Here are the averages by segment, according to KBB's analysis.
| Vehicle Segment | Average Price |
|---|---|
| Compact car | $21,783 |
| Compact SUV/crossover | $31,027 |
| Electric vehicle | $42,620 |
| Entry-level luxury car | $42,016 |
| Full-size car | $36,487 |
| Full-size pickup truck | $51,424 |
| Full-size SUV/crossover | $66,811 |
| High-performance car | $97,481 |
| High-end luxury car | $92,800 |
| Hybrid/alternative energy car | $27,722 |
| Luxury car | $58,174 |
| Luxury compact SUV/crossover | $46,563 |
| Luxury full-size SUV/crossover | $89,524 |
| Luxury mid-size SUV/crossover | $57,390 |
| Luxury subcompact SUV/crossover | $39,882 |
| Mid-size car | $27,545 |
| Mid-size pickup truck | $36,203 |
| Mid-size SUV/crossover | $39,969 |
| Minivan | $33,495 |
| Sports car | $36,147 |
| Subcompact car | $16,511 |
| Subcompact SUV/crossover | $25,197 |
| Van | $40,484 |
Source: Kelley Blue Book
Average New Car Price by Make
You'll also find big price differences based on the vehicle's manufacturer. Some brands market more budget-friendly models while others are more luxury-focused. Here's how KBB breaks down the average new car price for the top nine manufacturers and their makes.
| Vehicle Make | Average Price |
|---|---|
| American Honda (Acura, Honda) | $30,025 |
| Fiat Chrysler Automobiles (Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, RAM) | $42,787 |
| Ford Motor Company (Ford, Lincoln) | $44,644 |
| General Motors (Buick, Cadillac, Chevrolet, GMC) | $43,144 |
| Hyundai, Kia | $28,957 |
| Nissan North America (Nissan, Infiniti) | $30,300 |
| Subaru | $31,171 |
| Toyota Motor Company (Lexus, Toyota) | $36,970 |
| Volkswagen Group (Audi, Volkswagen, Porsche) | $42,077 |
Source: Kelley Blue Book
Average Auto Loan Rates by Credit Score
Roughly 86% of new vehicles are financed, according to Experian's State of the Automotive Finance Market report for the second quarter of 2020, compared with just 37% of used vehicles. If you're planning on taking out an auto loan to purchase your next vehicle, it's important to understand how much it's going to cost.
Auto loan rates vary by credit score, so it's important to know where your credit stands to get an idea of the cost of financing. Overall, the average rate on a new car loan is 5.15%, according to Experian data. Here's how that breaks down based on credit score range:
| Credit Tier | Average Loan Rate |
|---|---|
| Super prime (781 to 850) | 3.24% |
| Prime (661 to 780) | 4.21% |
| Nonprime (601 to 660) | 7.14% |
| Subprime (501 to 600) | 11.33% |
| Deep subprime (300 to 500) | 13.97% |
Source: Experian
Keep in mind that some manufacturers offer 0% APR financing on some of their new models, but you'll typically need stellar credit to qualify for one of these promotions.
Regardless of what your credit score looks like right now, take some time to get your credit ready to buy a car by checking your score, reviewing your credit report and addressing potential issues that could make it difficult to get approved for favorable terms.
Decide if a New Car Makes Sense for You
Buying a brand-new car can be an exciting prospect, especially if you've only ever driven used vehicles. However, it's a good idea to take some time to consider both the benefits and drawbacks of a new car before you start shopping around.
Pros and Cons of a New Car
Driving a new car means you'll get access to the latest technology and features. Also, you'll have fewer worries about your car breaking down, and you'll have a manufacturer's warranty included if it does. In terms of financing, new cars are generally cheaper than used cars.
That said, new cars depreciate quickly, especially during the first year. New cars often lose more than 10% of their value in the first month after they're purchased and more than 20% after the first year of ownership. So if you didn't put a lot of money down, you might end up owing more on your loan than the car is worth (also called being "underwater" or "upside-down" on a loan); this can cause difficulties if you total the car or want to sell it. Also, new cars tend to be more expensive to insure than used ones, although actual rates can vary by make and model.
Pros and Cons of a Used Car
If you're still not sure about getting a new car, consider buying a used car instead. Used cars are less expensive, which means a lower monthly payment and less interest on an auto loan.
It's also possible to buy a used car that's still in excellent shape, especially if the manufacturer certifies its condition. It's common for dealerships to have an inventory of certified pre-owned vehicles that have undergone a rigorous inspection and refurbishment and may even have a limited warranty added.
However, reliability can be an issue with some used cars, and they may not still be covered by the manufacturer's warranty. You can buy a vehicle service contract for added peace of mind, but the covered services are usually limited. Often, you'll end up paying for repairs down the line out of pocket, so it's wise aside some money to be prepared for that.
How to Buy a New Car
If you've done your research and decided that buying a new car is the best option for you, here are some tips on how to go through the process and maximize your savings.
- Know your budget. Remember, new cars are more expensive than comparable used ones, so you'll want to check your budget to determine what you can afford. Dealers may try to focus your attention on the monthly payment, and get you into a more expensive car by extending the length of loan term. You'll want to consider the sales price and the total cost after finance charges, as well as the total amount of interest you'll pay over the course of the loan. A longer loan term may, in fact, lower your monthly payment, but it could cause you to pay thousands more in interest over time if it means paying off your loan for an extra one, two or even three years.
- Shop around for auto loans. Dealers can arrange financing, and if you qualify for a 0% APR promotion, that may be your best bet. But it's still a good idea to shop around for an auto loan before you head to the dealership. Checking with three to five lenders, such as the financial institution you already bank with, will not only give you an idea of what you can expect with rates but also potentially give you some negotiating power with the lenders the dealer uses. Securing financing on your own before you go into the dealer will give you a hard price limit, which provides even greater negotiating power.
- Do your research on models. Take some time to research new cars online in your area to understand what the prices are and whether some dealers are offering promotions, such as 0% APR financing or rebates. Depending on what you can find, doing a little legwork could save you hundreds or even thousands of dollars.
- Negotiate with the dealer. Depending on the situation, there might not be a lot of wiggle room in the price of a new car, but it doesn't hurt to try. You can potentially gain some leverage by visiting the dealership at the end of the month or quarter when salespeople are scrambling to meet sales quotas. Doing your research before you head to the dealership will also help you because you'll have offers from other dealers on hand to compare.
If you're in a time crunch, you might not have a lot of time to go through these steps, but doing at least a little of each could make a difference in your costs. Ideally, you'll start shopping for a new car when you don't necessarily need one, so you'll be able to walk away from deals more easily and wait for the right one.
Maintain Good Credit After Your New Car Purchase
Getting your credit ready for a vehicle purchase is an important way to improve your odds of getting a low interest rate. Once you close the deal, though, continue improving your credit score or maintaining it if it's already in excellent shape.
Experian's credit monitoring tool can help you stay on top of your credit by providing free access to your FICO Score powered by Experian data and your Experian credit report. You'll also get real-time updates when information is added to your credit report, including new accounts, credit inquiries and new personal information.
If your credit still needs some work, monitoring and working to improve your score may give you an opportunity to refinance your auto loan in the future. It can also help set you up for better financing in the future. And if your credit profile is already in good standing, monitoring it can help you keep it that way.
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About the author
Ben Luthi
Ben Luthi has worked in financial planning, banking and auto finance, and writes about all aspects of money. His work has appeared in Time, Success, USA Today, Credit Karma, NerdWallet, Wirecutter and more.
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