Many potential buyers decided to wait until the market returns to normal after the average monthly car-buying cost surpassed $700 and the car prices reached new record highs in May.

Six months later, it seems that normal is further away than ever. The Federal Reserve keeps raising the federal funds rate. This has driven auto loan interest rates up to a 20 year high and the average new car transaction price to $48,000.

Cox Automotive data shows that the average monthly payment for a new car was $748 in October. Based on a 70%-month-term loan with 10% down, the average used-car payment has surpassed $550.

Edmunds, an automotive research company, lists October’s average car loan interest rate at 6.3% for new cars and 9.6% for old ones. Ivan Drury is the Edmunds senior manager for insights and says that slight price increases in cars are being offset by rising rates.

Drury states that even if you are able to save $500 on the car’s purchase price it can still be erased on interest rates if you don’t get exactly what you want.

Drury illustrates Drury’s point by showing that a $46,000 car would be financed for six years at 3.1% APR. This would lead to a $700 monthly car payment. You still get $700 monthly payments if you reduce the loan amount to $42,000 at 6.3% interest for the same term.

Matt Degen, senior editor at Kelley Blue Book says that it is still becoming more difficult to buy even a used vehicle. That’s something I don’t think will change much. Even if inventory issues recede, rising interest rates, and tighter lending standards could cause additional difficulties for people to overcome .”

All segments of car-buying are affected by high car payments

Charlie Chesbrough, Cox Automotive’s senior economist, stated that “No buyer can avoid these higher rates.” These rates are being passed on to everyone. This means that monthly payments will be increased .”

Chief economist Jonathan Smoke stated that the “lethal combination of high car prices, high interest rates and low credit scores” is driving down the number of buyers who have lower incomes.

Edmunds reported that 14.3% of consumers will make monthly car payments exceeding $1,000 to finance a new vehicle. These car payments of $1,000 or more are due to consumers’ preference for large trucks and SUVs, as well as luxury brands.

Drury says, “I tell people that if a $1,000 monthly car payment makes financial sense for you and your budget, then it’s okay.” We see that a person may pay $1,400 per month for a 72-month contract at 10% APR. This is nearly $30,000 in finance fees. .”

Waiting to buy a car doesn’t make sense

Tim Roeder, 26 years old, of Westfield, Indiana and his wife, had no car payments until Roeder’s 10 year-old car required costly repairs. Roeder said they were not “super excited” about taking on a car payment in today’s market. However, some planning and a job offer helped them to do so.

Roeder met with his wife to discuss their budget. He used an auto loan calculator for a maximum payment amount, and he researched trade-in value. Roeder took the day off work to go to the dealership without any preconceived notions but with a set of numbers and was ready to leave. Roeder says that it helped him feel more comfortable about the decision and pulled the trigger.

Roeder discovered that running the numbers ahead puts safeguards around the purchase and gives buyers the power of saying yes or no.

Despite rising interest rates and car payment costs, traditional car-buying advice is still useful for people who are unable to put off purchasing a car.

The rule of thumb in a typical car market is to spend less that 10% of your take home pay on a car purchase. You can also reallocate other spending if that seems too much. To reduce your monthly payment, avoid taking out a long-term loan. You could end up owing more than the car’s value.

Compare interest rates offered by different lenders. Pre-qualification is a service that allows you to compare interest rates from different lenders. Next, you can apply for a preapproved loan, and then bring it to the dealership. They will give you a rate that is better. You might be able refinance to a lower interest rate with another lender if you don’t do enough research and end up paying a dealer’s double-digit rate.

Another long-held advice is to pay a minimum 20% down payment on a new vehicle and 10% for used vehicles. You can reduce your monthly payment by putting down any amount that is possible.

Drury says that you can buy an older vehicle and some vehicles are capable of running for over 100,000 miles. If you want to save money, or get a vehicle that will last you for a year or more span>

When buying an older vehicle, make sure to research models that are known for their longevity and invest in a pre-purchase inspection. This will help you avoid taking out a loan that could cause your car to lose its value.