$300 Car Payments Are Now a ‘Thing of the Past’
Stock photo. (Getty Images/Nuttawan Jayawan)
Sticker shock on new vehicles is colliding with a growing trend of long-term auto loans. In the U.S., new-car prices have jumped roughly one-third since 2020, with the average sticker price surpassing $50,000 this fall—up from under $38,000 before the pandemic, according to Kelley Blue Book. As prices climbed, so did monthly payments, which reached about $760 in November, estimates JD Power.
“We don’t have $300 monthly payments any longer in new vehicles,” says Pennsylvania dealer David Kelleher. “It’s a thing of the past.”
To make payments more manageable, many buyers are stretching loans well beyond the traditional four- to five-year terms. Experian data show that in the third quarter, about one in three buyers opted for loans lasting 72 months or longer, up from 29% a year ago. Loans of 85 to 96 months—around eight years—are also increasing, with some now reaching 100 months. This trend has helped push total U.S. auto debt to $1.66 trillion, roughly $300 billion more than five years ago, according to the New York Fed.
Industry leaders say longer loan terms are easier to justify because cars last longer. However, rising prices mean buyers are paying significantly more interest over the life of a loan. Michael Douglas of Chase Auto notes that the average new-car loan now exceeds $42,000 and urges consumers to consider the full cost of ownership. For example, a $50,000 car at 5% interest costs about $950 a month over five years, totaling $6,600 in interest. Stretching that loan to 100 months reduces the monthly payment to around $600 but nearly doubles the total interest to over $11,000.
President Trump has directed regulators to create a pathway for smaller, more affordable vehicles that currently don’t meet U.S. safety rules. Automakers are responding: Ford reports buyers are gravitating toward basic trims, and its low-priced Maverick pickup saw sales jump 76% last month. Jeep, after lowering prices on many models and moving more of its lineup below $50,000, reported an 11% sales increase last quarter.
Still, as Sonic Automotive CFO Heath Byrd notes, without more affordable options, the ability to buy a vehicle will remain “a real concern.” For those still hunting for deals, ABC News highlights potential options, while Investopedia examines opportunities in the used-car market. Interestingly, owning a Mazda Miata now costs less, adjusted for inflation, than it did in the late 1980s.
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