The demand for trucks right now is at an all time high, so buying a truck can feel a bit overwhelming. With prices higher than ever, you want to make sure, if you're buying, you're getting a good rate on your truck loan.
If you're in the market for a new truck, you might be wondering if now is a good time to buy that truck you’ve had your eye on, or if you should hold off and wait until next year. If you already have a truck, maybe you are wondering if now is a good time to refinance your truck loan. Today, we are talking all about buying a new truck, from cost to car loan APRs, to help you make the right decision.
Let’s talk about buying a new truck: the costs, the rates, and how to decide if it’s the right time for you to buy.
How much does a new truck cost?
The price of a new truck is certainly on the rise these days. Between June 2020 and June 2021, new truck prices increased an average of 7.2% according to Kelley Blue Book. That’s a huge increase in just 12 months.
According to Kayla Reynolds, an analyst at Cox Automotive, “New-vehicle affordability continues to decline as the income required to purchase the average new vehicle continues to climb. In June, for the first time in a decade, vehicle buyers were essentially paying sticker price – the manufacturer's suggested retail price – for new vehicles."
According to Kelley Blue Book, a new truck now costs an average of $41,105, and full size pickup trucks tend to average out closer to $50,000. Many full size pickup trucks are out pricing luxury cars. The good news is there are still some highly rated affordable truck options on the market, including the 2022 Toyota Tacoma (starting at $26,700), the 2022 Ford Ranger (starting at $25, 500), and the 2022 Ford F-150 (starting at $29,990).
Why are trucks so expensive?
Why exactly are trucks so expensive right now? There are a few reasons for this, many of which have to do with the fact that pickup trucks are getting nicer and nicer as the years go on. They are no longer strictly for utility, but are instead morphing into versatile luxury rides. Here are the top reasons trucks are so expensive.
Pickup trucks are becoming more luxurious
New trucks these days are akin to luxury cars. They often have full grain leather, Wi-Fi, and touch screen infotainment.
They are being used as family vehicles
Pickups are getting larger and roomier, so they are quickly replacing minivans and SUVs as family car options. They now have many family friendly features built in, and their ability to double as a work truck makes them a desirable new vehicle option.
They are more powerful than ever
An increase in power and capability has made these pickups much more expensive. Advances in technology including turbochargers, direct injection, and aluminum body panels have increased the towing capacity and increased the horsepower tremendously. (The average truck could tow 7,000 pounds in the mid 1990s, while today the average pickup can tow 10,000 pounds) But all of these advancements come with a hefty price tag for research and development, which ultimately is passed on to the consumer.
There are heavy dealer markups
Since trucks these days are so nice and in demand, dealerships mark them up much more than other types of vehicles.
There are higher profit margins
Manufacturers are taking advantage of this demand as well. Reuters estimates that the average full size pickup truck sold by GM brings in $17,000 of profit. This is much, much higher than the markup for a car.
What are today’s auto loan rates?
If you want to buy a new truck, it’s going to come with a pretty hefty price tag. But the good news is that car loan rates are still exceptionally low. So if you luck into a good deal, now is the perfect time to buy a new truck.
Today's average auto loan rates depend heavily on your credit score. These are the average car loan APRs from the last quarter of 2021, as reported by Experian.
- Exceptional (Super Prime, 800-850): 2.47%
- Very good (Prime, 740-799): 3.51%
- Good (Near Prime, 670-739): 6.07%
- Fair (Subprime, 580-669): 9.41%
- Very poor (Deep Subprime, 300-579): 12.53%
The higher your credit score is, the lower your car loan APR will be. It is always a great idea to work on increasing your credit score before applying for a car loan.
How does the loan term affect loan rates?
The length of your car loan will greatly affect the car loan interest rates that you are offered. You can typically find financing ranging from 24 months to 72 months, with the shorter repayment periods offering lower interest rates. But remember, the shorter the repayment period is, the higher your monthly payments will be, as there is less time to split up the total cost.
With longer financing options becoming available, many people are choosing to have lower payments over a longer period of time, even if it means that their interest rates will be higher and they will be paying interest for a longer period of time. This is another reason that new truck demand is increasing: while prices are higher, financing is making it doable.
If you are in a position where you can afford new truck payments, now is a great time to take advantage of the low rates. But if you are struggling to pay your bills every month, wait to pull the trigger on a new set of wheels.
Should I refinance my truck loan?
If you already have a truck that you are financing, it might be a great time to refinance your loan. Rates have dropped drastically in the past few years, so even if your truck is only two years old, the rates may be 3 to 4 points lower than what you are currently paying. And this can translate to hundreds if not thousands of dollars in savings.
So how do you know if the time is right to refinance your car loan?
- If your credit score has improved since your last auto refinance or initial financing. Check your credit score and see how it compares to when you initially financed your truck. If it has increased, even if only slightly, you may qualify for a much better car loan interest rate.
- If the market rates have dropped since your last auto refinance or initial financing. If the market rates have dropped in general since your last financing (which they probably have in today’s economy), you may qualify for a much better car loan interest rate.
- If you need some breathing room in your monthly budget. Refinancing your car loan can save you money by lowering your interest rate. It also allows you to change your repayment schedule, lengthening your repayment period and thus reducing your monthly payments. This can free up a lot of money in your monthly budget.
- You want to add or remove a cosigner. If you want to change who is listed on the loan, you will need to refinance your loan. Since each car loan interest rate and set of terms is determined based on who is listed on the loan, you cannot simply change who is listed as the borrower.
Who will refinance my truck loan?
If you are looking to refinance your car loan, you have a lot of options. From traditional banks, to credit unions, to online lenders, there are seemingly endless options for refinancing.
Your best bet is to use a company that specializes in auto refinance, a company like Auto Approve. Auto Approve can guide you through the refinance process, from selecting and applying to different lenders, comparing the different offers, and signing all of the necessary paperwork. Refinancing can be complicated, but when you have a partner like Auto Approve who is dedicated to making your refinance as easy as possible, it can be a breeze! And rest assured we NEVER markup the rates from lenders. We are passionate about passing those savings on to you.
That’s everything you need to know about buying a new truck and refinancing your existing truck loan.
If you can find a good deal on a truck, today’s rates make it a fantastic time to purchase a new truck. Interest rates will most likely increase over the next few months and years, so you should try to take advantage of the low rates while you are able. If you already have a truck that is financed, you can benefit greatly from a car loan refinance. Our customers routinely report savings of hundreds if not thousands of dollars. And Auto Approve makes it so easy to get started! Just head over to our website and fill out some basic information, and we can get you offers in minutes.
So if refinancing your truck sounds like a good move for you, don’t wait any longer – get your free quote today from Auto Approve!
