"Higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum," the New York Fed wrote.
Meanwhile, the cost of purchasing a new vehicle has climbed significantly in recent years. According to Cox Automotive, the average price of a new car has risen from approximately $38,000 in January 2020 to more than $48,500 in January 2025, an increase of over $10,000. In the midst of the Biden administration, financing costs surged, with the average monthly payment for a new car loan reaching $795 in December 2022. By January, average monthly financing costs dipped to $755. However, they still remain high above the $566 monthly payment in 2019.
President Donald Trump's tariffs on auto imports for Canada and Mexico, which include a 25% levy on vehicles and parts, went into effect on Tuesday.