Heading into 2026, the automotive industry is facing some challenges as monthly car payments for both new and used vehicles continue to reach record levels. With new car prices soaring, the average monthly payment for a new car has hit $772 in the fourth quarter of 2025, while used cars are slightly lower at an average of $570, according to Edmunds.
The increasing cost of car ownership is also attributed to steep insurance and car maintenance prices, in addition to the cost of obtaining a loan. Good credit scores play a crucial role in securing the best auto loan rates and ensuring a lower-than-average monthly payment.
Auto loan interest rates are projected to decrease slightly in 2026, potentially reaching their lowest levels since 2023. However, this reduction may not be sufficient to offset the various factors contributing to the rising cost of car ownership, such as high insurance and maintenance expenses.
In terms of financing, banks remain the most common choice for new and used auto loans, followed by credit unions and captive financing options. Longer loan terms are becoming more common, with a significant portion of new car loans lasting 84 months or longer.
When it comes to credit scores, individuals with super prime ratings (781 to 850) tend to have lower monthly payments compared to those with subprime or deep subprime scores. Shopping around for the best auto loan rates can help lower monthly payments, but this can be challenging for individuals with poor credit or minimal credit history.
It’s essential for car buyers to consider the total cost of ownership, including factors like car maintenance, insurance, fuel costs, registration fees, and vehicle depreciation. Making a down payment can reduce monthly payments and the overall purchase cost, with drivers on average putting down $6,856 for new cars and $4,219 for used cars.
Overall, while current interest rates may make monthly payments more expensive, taking the time to compare rates and improve credit scores can lead to securing better auto loan rates and more manageable monthly payments. With careful consideration and planning, car buyers can navigate the challenges of the automotive market and make informed decisions when purchasing a vehicle in 2026.
