On the Dash:
- New vehicle prices have risen 33% since 2020, driving average monthly payments to about $760.
- Longer loan terms of 72 months or more are becoming common as buyers manage higher sticker prices.
- Limited low-cost vehicle options are increasing consumer debt and reshaping automaker pricing strategies.
The cost of buying a new vehicle in the U.S. continues to climb, forcing many consumers to rely on longer loan terms to manage monthly payments. New car and truck prices are up 33% since 2020, and the average transaction price surpassed $50,000 this fall.
As prices have increased, so have monthly payments. By November, the average new-vehicle payment reached about $760. Inflation and elevated interest rates are now pressuring household budgets, leading some buyers to take on extended financing terms of six years or longer.
There’s a growing shift toward long-duration loans. In the third quarter, roughly one-third of new-vehicle buyers financed their purchases with loans lasting at least 72 months, up from 29% a year earlier, according to Experian. Loans ranging from 85 to 96 months accounted for about 1.61% of buyers through October, with some financing extending to nearly 100 months, particularly for large trucks and SUVs.
The trend reflects limited affordable options in the new-vehicle market. Automakers have exited mainly the sub-$30,000 segment, reducing choices for price-sensitive buyers and increasing reliance on financing to bridge the affordability gap. As a result, average new-vehicle loan balances now exceed $42,000.
Total U.S. auto loan debt reached $1.66 trillion in the third quarter, about $300 billion higher than five years earlier, according to Federal Reserve data. Longer loan terms reduce monthly payments but significantly raise total interest costs over time, increasing financial risk if vehicle values decline or household finances tighten.
Federal policymakers have begun emphasizing the need for lower-cost vehicles. President Donald Trump has directed regulators to explore ways for automakers to sell smaller, more affordable vehicles that do not currently meet U.S. safety standards.
There are early signs that consumers are responding to lower-priced offerings. Some automakers report increased demand for base trims, while brands that have reduced pricing on select models are seeing improved sales performance.
