New-Car Buyers Stretch Loans as Payments Hit Record Highs

Car buyers are stretching their budgets to the limit as they take on record-long loans and record-high payments while putting less money down.

Nearly 1 in 4 new-vehicle buyers who financed in the second quarter signed on for an 84-month loan or longer, according to new Edmunds data. The trend shows how far affordability pressure is pushing shoppers in a market where high prices and elevated interest rates are making new vehicles harder to afford.

Longer loans are at record levels. Edmunds found that 36.5% of all financed new-vehicle purchases were for loans of 73 months or longer, up from 27.3% a decade prior. And 23.9% of second-quarter shoppers who financed their cars signed on for loans of 84 months or longer, another record, according to Edmunds.

Monthly payments reached an all-time high for the third straight quarter. The average monthly payment on new-vehicle purchases reached a new record of $777, slightly above last quarter’s record of $773.

Monthly car payments above $700 are no longer unusual. Average monthly payments crossed the $700 mark for the first time in the third quarter of 2022 and have generally stayed high or moved higher since, according to Edmunds.

Buyers Are Financing More and Putting Less Down

Consumers financed a record amount on new-vehicle purchases, according to Edmunds. The average amount financed reached a new all-time high of $44,156, up $257 from the first quarter of 2026 and up $1,768 from the second quarter of 2025.

Car shoppers are putting less money down. The average down payment fell to $5,815 in the second quarter from $6,206 in the first quarter, and from $6,433 a year ago.

Down payments represented just 11.6% of the average total purchase in the second quarter, the lowest share since the third quarter of 2020.

One in five new-vehicle buyers who financed in the second quarter — 20.3% — took on monthly payments of $1,000 or more, tying the record from the fourth quarter of 2025.

Interest Rates Remain Elevated

Car shoppers also paid more in interest as APRs, loan amounts, and loan terms remained elevated in the second quarter. How much interest were car shoppers paying? The average total amount of interest paid over the life of a new-vehicle loan climbed to a record $9,811, up from $9,592 last quarter and $9,616 a year prior.

Zero-percent financing has all but disappeared with just 1.2% of new-vehicle buyers securing a loan with a 0% interest rate in the second quarter, down from 2.6% in the first quarter.

Zero-percent financing peaked at 24.2% in the second quarter of 2020 amid pandemic-era incentives and has not reached a 4% share since the fourth quarter of 2021, according to Edmunds.

Used-car shoppers are feeling the pressure, too. A growing share are taking on $1,000-or-more monthly payments, and the average amount financed for a used vehicle also increased.

The share of used-car purchases with monthly payments of $1,000 or more rose to a record 6.3% in the second quarter, while the average amount financed for a used vehicle climbed to $30,414, up from $29,080 in the second quarter of 2025.

What the Data Says About the New-Vehicle Market

“Affordability is such a massive hurdle that buyers are forced to stretch their budgets to the absolute limit just to get into a new vehicle,” said Jessica Caldwell, Edmunds’ Head of Insights.

“When you see loan terms extending to record lengths, down payments shrinking, and monthly payments hitting all-time highs, you’re looking at a clear recipe for long-term financial strain.”

Caldwell said the affordability crunch is unlikely to ease quickly.

“You’re looking at a clear recipe for long-term financial strain.” — Jessica Caldwell, Edmunds

“Until we see a major shake-up in automaker incentives, a meaningful drop in interest rates, or a shift toward a more affordable mix of vehicles — none of which appear to be on the horizon — consumers will have to keep walking this financial tightrope,” Caldwell said.

The Dangers of Focusing on the Monthly  Payment

Car shoppers risk putting themselves in financial danger when they focus too heavily on the monthly payment instead of the overall cost of a vehicle loan.

“Pushing loan terms past six or seven years might make an average monthly payment more digestible today, but it’s a mathematical trap,” said Ivan Drury, Edmunds’ Director of Insights.

“When you pair a 7.0% APR with an 84-month loan and a smaller down payment, you’re signing up to hand over nearly $10,000 on average in interest alone.”

By extending the lengths of car loans, consumers also risk owing more on their vehicles than they are worth by the time they trade them in.

“Unfortunately, stretching out the term to be able to swallow a higher-priced vehicle guarantees you’ll be building equity at a snail’s pace, leaving you highly vulnerable to falling underwater when it’s time to trade in,” Drury said.

Consumer Car Buying Tips

Looking to buy a car? These steps can help you avoid taking on more debt than your budget can handle.

Decide how much car you can afford. Take a close look at your current budget and consider how much of a monthly payment you’ll be able to handle. Then decide whether the loan term needed to reach that payment still makes financial sense.

Choose your loan amount and loan term carefully. Longer terms make for smaller monthly payments but they also mean you’ll pay more interest over the length of the vehicle loan.

Don’t forget about the down payment. A down payment gets paid upfront and you may need to put down a larger down payment if your credit isn’t great, according to AAA.

For the best deal on a vehicle loan, check out deals available with your bank or credit union and online lenders. Bring the best offers with you when you head to the dealership so you can compare them with what the dealer has to offer, AAA advises.

Negotiate the price of the vehicle you are buying separately from its financing, AAA recommends.

Your credit score can have a major impact on the interest rate you pay on a car loan. A good credit score can help you qualify for a lower rate on your car loan, according to GreenPath Financial Wellness. 

Buying a car is a big financial decision. Don’t rush, and don’t be afraid to walk away from a deal that only works because the loan is stretched too long, GreenPath Financial Wellness advises.