More and more people are buying their cars with cash, and it’s almost entirely because high interest rates have made auto loans miserably high. Both gas-powered and electric vehicles saw double-digit rises in the number of folks who bought them with cold, hard cash, according to Automotive News.
Cash deals for internal combustion-powered vehicles were over 18 percent in 2023. That’s up from 16 percent in 2022, Experian told AutoNews. As it turns out, that number is even higher for electric vehicles. Nearly 26 percent of all deals for EVs were done in cash in 2023, up a half percent over 2022. Those may not sound like huge increases, but millions of folks are buying cars every year, so every percentage point equals a ton of folks.
The reason for this increase in cash deals? Unsurprisingly, high interest rates. The Federal Reserve is expected to lower rates this year, but it left them unchanged at its meeting on January 31. Experian expects that as interest rates come down, cash deal rates probably will as well.
Automotive News spoke with dealers around the country who are seeing this latest uptick in cash sales for themselves.
Oliver Brodlieb, owner of East Hills Auto Group in Greenvale, N.Y., said he has seen customers who would have normally financed pay cash in reaction to higher rates.
”They have had some money saved up on the sideline,” Brodlieb said. But “we are always happy to sell a car.”
Rhett Ricart, CEO of Ricart Automotive in Columbus, Ohio, said the rise in cash deals is coming from a specific subset of customers.
”Anybody that has held any stock for the last three years has made extra money” that they could use to pay cash on a vehicle, Ricart said. But “do you think the average person that works in a $30,000- to $40,000-a-year job can afford a $40,000 car?”
So, more people are buying cars with cash than they were before. What this is really telling me is that cars are just getting more and more unaffordable for the average person – Joe Carbuyer. It’s a brutal world out there, folks.