Rising car prices and higher auto loan rates force U.S. buyers into monthly payments above $1,000. Find out how longer loan terms affect wallet – read on.
Record-High Monthly Payments
According to data compiled by Edmund – a leading automotive research firm – 20.3% of new‑car financing contracts in the United States in Q4 2025 required monthly payments of $1,000 or more. That’s the highest share ever recorded, up from 19.1% in the previous quarter and 18.9% a year earlier.
Why Payments Are Shooting Up
Two forces are tightening the belt on American car buyers: rising vehicle prices and higher interest rates. As the average transaction price climbs, borrowers are forced to take larger loans and stretch the repayment period. Edmund’s market analyst Ivan Drury notes that “the combination of higher prices and interest rates means many consumers are now borrowing more and paying for longer, often pushing four‑figure monthly payments.”
Impact on New and Used‑Car Markets
The trend is not limited to brand‑new vehicles. About 6.3% of financing agreements for used cars also exceed the $1,000‑a‑month threshold. The average monthly outlay for a new‑car loan hit a record $772, while the average loan balance rose to $43,759 – both all‑time highs for the U.S. market.
Longer Loan Terms Become the Norm
Even though average rates have eased slightly to 6.7%, borrowers are opting for longer terms. In Q4 2025, 20.8% of new‑car buyers chose financing periods of 84 months or more (seven years or longer). That figure, while down from the previous quarter, remains far above pre‑pandemic levels. By comparison, only 17.9% of loans were 84 months in Q4 2024.
Promotional 0% Financing Returns
Zero‑percent financing is still scarce but creeping back. It accounted for 3.1% of new‑car loans in the last quarter, up from 2.4% a year earlier, suggesting that manufacturers are re‑introducing limited‑time incentives.
Shifting Buyer Demographics
Data from Cox Automotive shows that households earning $150,000 or more have increased their new‑car spending by 45% since 2019, while many buyers with incomes below $75,000 are exiting the market altogether. Automakers are responding by focusing on high‑margin segments – larger SUVs, pickup trucks and premium‑trim models that command higher price tags and profit margins.
What It Means for Consumers
For the average driver, the combination of higher prices, tighter financing and longer loan terms translates into a heavier monthly budget hit. Consumers who once could finance a vehicle with a modest payment now need to set aside four‑digit sums each month.
Prospective buyers should shop around for the best rate, consider a larger down‑payment, and weigh the total cost of ownership rather than just the monthly figure.