Rising car prices and interest rates push US borrowers to pay over $1,000 a month on auto loans. Discover the trends and how to navigate them – read more now.
Soaring Prices and Rates Drive Up Monthly Payments
According to data compiled by Edmunds and reported by Carscoops, more than one‑fifth of new‑car loans in the United States now require monthly payments of $1,000 or more. In the fourth quarter of 2025, 20.3 % of financed purchases topped that threshold – the highest share on record, up from 19.1 % in the previous quarter and 18.9 % a year earlier.
Both New and Used Vehicles Feel the Pressure
The trend isn’t limited to brand‑new cars. Roughly 6.3 % of financed used‑car loans also exceed $1,000 per month, underscoring a broader affordability squeeze across the entire auto market.
Record‑High Loan Amounts and Terms
Average monthly outlays for new‑car financing have surged to a historic $772. The average loan balance rose to $43,759, another record for the U.S. market. Even though the average interest rate dipped slightly to 6.7 %, borrowers are still stretching their budgets.
Lengthier terms are becoming the norm. Over 20 % of new‑car buyers now opt for financing periods of 84 months or longer – essentially a seven‑year commitment. That figure fell modestly from the prior quarter but remains far above pre‑pandemic levels (the same share was just 17.9 % in Q4 2024).
Promotions Remain Scarce
Zero‑percent financing is still a rarity, representing only 3.1 % of new‑car loans in the fourth quarter, up modestly from 2.4 % a year earlier. The slight uptick hints that manufacturers may be reviving incentive programs, but the bulk of financing continues at double‑digit rates.
Income Gaps Shape the Buyer Landscape
Data from Cox Automotive shows that households earning $150,000 or more have boosted their new‑car purchasing power by 45 % since 2019. At the same time, buyers with incomes below $75,000 are increasingly exiting the market, reflecting a widening divide between high‑earning shoppers and the rest of the population.
Manufacturers are responding by focusing on premium segments – larger trucks, SUVs and high‑end trims that carry higher margins. This shift further pushes entry‑level buyers toward higher loan balances and longer repayment periods.
What This Means for Consumers
For anyone considering a new vehicle, the message is clear: higher prices, higher rates, and longer loan terms are now the reality of the U.S. auto market. Prospective buyers should shop around for the best financing offers, consider shorter loan terms where possible, and weigh the total cost of ownership before signing on the dotted line.