Connecticut and Massachusetts Lead the Country in Responsible Car Shopping Behavior, According to New Edmunds Analysis

SANTA MONICA, Calif., Oct. 18, 2018 /PRNewswire/ -- With average transaction prices, loan term lengths and interest rates for new vehicle purchases sustaining highs not seen since before the recession, buying conditions are becoming far less favorable for American car shoppers. To get a sense of how consumers are adapting to this changing environment, the car shopping experts at Edmunds conducted an in-depth analysis of transaction and finance data to rank all 50 states on responsible car shopping behavior. Connecticut, Massachusetts, Rhode Island, Michigan and New Jersey lead the country in responsible car shopping behavior; Oklahoma, Mississippi, Alaska, Arkansas and New Mexico bottomed out the list. A full graphic of the rankings can be found here.

Analysts also dug into economic and Edmunds site data to pinpoint exactly why consumers in certain states seemed to be more responsible car buyers. They learned that the amount of time shoppers spent using car shopping calculators on Edmunds had more of a direct correlation on responsible behavior than any other indicator analysts studied. According to Edmunds site data, shoppers from the top five ranked states typically spent 55 percent more time on calculators versus shoppers from the bottom five.

"While some states have unique environmental conditions or regional preferences that may impact purchasing decisions, the primary driver behind responsible shopping is simply how informed shoppers are and how much they do to prepare before they even step foot into the dealership," said Ivan Drury, Edmunds' senior manager of industry analysis. "Responsible car shopping behaviors vary from state to state, but on the balance, these differences are not driven holistically by economic factors or income levels."

Leveraging insights gleaned from more than 842,000 vehicle transactions between May and September of 2018, Edmunds experts defined "car shopping responsibility" by analyzing four components: the average percentage of trade-ins with negative equity, the average amount owed on negative equity trade-ins, average loan term lengths, and average auto loan interest rates across each state. Each state was ranked within each individual metric and then given an overall aggregate score. The highest ranked state, Connecticut, scored top marks across the board in terms of lowest share of trade-ins with negative equity (10 percent), lowest amount owed on trade-ins ($4,500), shortest average loan term lengths (64.2 months) and lowest annual percentage rates (APRs) of 4 percent. New Mexico ranked lowest in the nation in terms of shopper responsibility due to holding the second-highest share of transactions with a negative equity trade-in (32 percent), the second-highest amount owed on underwater vehicles ($6,600), the second-highest average APR of 7.1 percent, and the highest loan term lengths in the nation at 72.4 months on average.

"While there are certain things about shopping for a car that are out of your control, like your budget or needs, being smart about your research is something every consumer can do," said Matt Jones, Edmunds' senior consumer advice editor and former car salesman. "Buying a car is a significant investment that can affect your financial stability for years to come, and you can avoid falling into the negative equity trap if you're mindful about a few key things up front."

To help consumers responsibly shop for a new vehicle, Edmunds created an insider guide to avoid falling into a bad car purchase:

• Get preapproved for your car loan. Interest rates are steadily on the rise, so it's important to shop around and see what different credit options might be available to you. Getting preapproved is the closest you can come to the perks of paying with cash while not having to save up for months or years in advance.
• Put at least 10 percent down. While a 20 percent down payment is ideal, it's also difficult for most people to handle. Edmunds recommends combining a down payment of around 10 percent with gap insurance or new-car replacement coverage. That lets you keep more money in your pocket without the risk of being underwater on your car loan.
• Keep loan terms shorter. As you plan your financing, Edmunds recommends a loan term that's no longer than 60 months, despite the national average hitting 69 months in September. Higher interest rates are a major reason to stick with a 60-month loan — the longer the term, the more interest you will have to pay on the loan, both in terms of the rate itself and the finance charges over time.
• Consider leasing. If you know that you experience "car fatigue" and don't plan on driving your vehicle until its wheels fall off, consider leasing instead.
• Consider residual values when purchasing a new vehicle. Right now, the market heavily favors trucks and SUVs, which are retaining significantly higher values compared to their car counterparts. You might get a great deal on a sedan right now, but if you're planning on trading it in sooner than five years from now, you might owe more than what it's worth.

For car shoppers who are underwater or stuck in a bad car loan now, Edmunds experts note that there are still options; tips on how to get right side up can be found here: https://www.edmunds.com/car-buying/being-upside-down.html. Additionally, more insight into recent auto industry trends can be found in the Edmunds Industry Center at http://www.edmunds.com/industry-center/, and expert tips on how to purchase a new vehicle can be found on Edmunds' Car-Buying Tips and Advice page here: https://www.edmunds.com/car-buying/.

About Edmunds 
Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America's best workplaces by Fortune and Great Place to Work, Edmunds is based in Santa Monica, California, and has a satellite office in Detroit, Michigan. Follow us on Twitter, Facebook and Instagram.

CONTACT:
Talia James
Senior Manager, Public Relations
[email protected]
310-309-4900
http://edmunds.com/about/press

SOURCE Edmunds

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