The cost of owning a car has hit a new peak, with more than one in five new-car buyers now facing monthly payments exceeding $1,000. According to recent data from Edmunds, this record-breaking figure shows how difficult it’s become for everyday Americans to afford a vehicle, whether they’re shopping for new or used options.
- A record 20.3% of new-car buyers committed to monthly payments of $1,000 or more in Q4 2025, up from 19.1% the previous quarter.
- The average monthly payment for a new vehicle hit an all-time high of $772 in the fourth quarter of 2025.
- Even used-car buyers aren’t getting a break, with 6.3% now paying over $1,000 per month.
Why Car Payments Keep Climbing
The numbers paint a stark picture: the average monthly payment on a new vehicle climbed to an all-time high of $772 per month in the fourth quarter of 2025. But what’s driving these increases?
The average amount financed climbed to $43,759, which is also an all-time high. That means buyers are borrowing more money than ever before to get into a new car. Interest rates on auto loans are still historically high. The average annual percentage rate dropped to 6.7% in the fourth quarter, down from 7% in the third quarter.
And the situation gets worse: Just 3.1% of loans for new vehicles had a 0% rate. When automakers still offer 0% rates, consumers must have good credit to qualify for those deals. If you don’t have excellent credit, you’re stuck paying premium rates on an already expensive purchase.
Stretching Payments Over Seven Years
People are doing what they can to make the math work. Some 20.8 percent or more than one in five buyers of financed new-cars signed up for loan terms of 84 months, which equals seven years or longer in Q4. That’s right, seven years of car payments. Think about that for a second. You could finance a car today and still be making payments on it when the next presidential election rolls around.
These extended loan terms help bring down the monthly payment, but they come with a catch. You’ll pay significantly more in interest over the life of the loan, and there’s a good chance you’ll owe more than the car is worth for years. Some buyers even turn to buy here pay here dealerships that specialize in financing for people with credit challenges, though these options typically come with even higher interest rates.
Used Cars Offer Little Relief
You might think switching to a used car would solve the problem. Unfortunately, the used market isn’t much better. Used-car buyers aren’t exempt, either, with 6.3% facing monthly auto loan payments of $1,000-plus as of the fourth quarter. That’s up from 6.1% in the third quarter of 2025 and 5.4% in the fourth quarter of 2024.
Used-vehicle buyers also hit a record, with 6.3 percent signing up for $1,000-plus monthly payments, driven by higher used prices and double-digit interest rates that averaged 10.6 percent in Q4. Yes, you read that correctly. Double-digit interest rates on used cars. The financial squeeze is real.
What Buyers Can Do Right Now
So what’s a car shopper supposed to do? Financial experts have some advice. Crystal Cox, a certified financial planner, said: “If your goal is to not have a $1,000 monthly payment on a car, then you’ve got to either buy a less expensive car, or save and have a nice down payment toward a vehicle.”
Data suggests that people are holding on to their cars longer before making a new vehicle purchase. The average age of vehicle trade-ins rose to 7.6 years in the first quarter of 2025, the oldest since 2019. Stretching the time between new car purchases can make it easier to accumulate savings.
In the last four months of 2025, the Federal Reserve initiated three interest rate cuts. Though experts expect the pace of reductions to slow in 2026, falling rates will benefit auto shoppers. More favorable borrowing terms may help bring buyers back to the market.
There’s a slim possibility that automakers may put more incentives in place in 2026 to help encourage sales. If manufacturers want to move inventory, they’ll need to make cars more accessible to middle-income buyers who have been priced out of the market.
Is Relief on the Horizon?
The car affordability crisis won’t fix itself overnight. Data from Cox Automotive shows that new-car sales have surged 45 percent since 2019 among households earning $150,000 or more, while buyers earning under $75,000 have largely exited the new-car market altogether. That trend tells you everything you need to know about who can still afford new vehicles.
If you’re shopping for a car right now, do your homework. Get pre-approved for financing from your bank or credit union before you set foot in a dealership. Know exactly what monthly payment fits your budget, and don’t let a salesperson talk you into stretching beyond it. The last thing you want is to be stuck with a $1,000 monthly payment for the next seven years.
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