The average monthly payment on a new vehicle in 2015 was $491, with the average amount financed standing at $28,769. Fast forward to the fourth quarter of 2025, and the average monthly payment has skyrocketed to an all-time high of $772, while the typical amount financed has also hit a record high of $43,759, according to data from Edmunds.
The increase in monthly payments and financing amounts can be attributed to several factors, including longer loan terms, buyers shelling out $1,000 or more a month for a vehicle, and rising insurance costs. Purchasing a new car is becoming increasingly unaffordable, mirroring the challenges of buying a house in today’s market.
To determine if you are overspending on a new car, it is essential to consider your monthly vehicle expenses in relation to your income. While traditional recommendations suggest spending 10% to 15% of your take-home pay on car-related costs, Chase Auto recommends keeping monthly vehicle expenses below 8% of your income. This budget should include the monthly loan or lease payment, fuel, and insurance costs.
One key strategy to lower your monthly payment is to make a significant down payment of at least 15%. This can help reduce the amount of interest paid over the life of the loan and lower your monthly expenses. Additionally, exploring financing options outside of the dealership, such as credit unions or banks, can result in better interest rates and potential savings.
Manufacturer incentives, such as low-rate financing or cash-back offers, can also play a significant role in making a new car more affordable. Deals are often more attractive on less popular vehicles, such as sedans and small hatchbacks, as automakers may offer steep discounts on slower-selling models.
When shopping for a vehicle, it is crucial to focus on the total cost of the car rather than just the monthly payment. Overpaying for a vehicle can lead to long-term financial losses, as cars depreciate over time. It is important to avoid being lured by a low monthly payment and instead consider the overall cost and potential resale value of the vehicle.
As the cost of insuring a car or truck continues to rise, it is essential to review your insurance policy for potential savings. Factors contributing to higher insurance costs include lender-required coverage for financed vehicles, the cost of comprehensive insurance claims, and claim volume in your area. By increasing deductibles, opting for auto-pay options, and bundling vehicle insurance with home coverage, you may be able to lower your premiums.
In conclusion, while the affordability of new cars may be reaching its limits, there are strategies that buyers can utilize to make purchasing a vehicle more manageable. By carefully considering monthly expenses in relation to income, making a substantial down payment, and exploring manufacturer incentives, buyers can find ways to make buying a new car more affordable.
