Owning a car in the U.S. is becoming increasingly expensive, with buyers taking on larger loans over longer periods and more Americans falling behind on payments, according to Experian’s latest State of the Automotive Finance Market report.
While no single trend signals a crisis, the combination of rising loan balances, extended financing terms, and expanding credit to subprime borrowers highlights a dramatic shift in the economics of car ownership. What was once a manageable five-year loan for an affordable vehicle is now often stretching longer and weighing more heavily on household budgets.
Monthly Payments Break $1,000 Barrier
For decades, four-figure car payments were associated with luxury vehicles or exotic models. Today, they are increasingly mainstream. Experian’s data shows the average monthly payment for a new car reached approximately $767 by the end of 2025, with lease payments averaging $613. Notably, nearly 19% of new-vehicle loans now exceed $1,000 per month.
Rising loan balances are a major factor. The average new-vehicle loan now sits around $43,500. Independent research from Edmunds also reports a record share of buyers committing to monthly payments above $1,000 as vehicle prices remain high and loan terms stretch longer. In practice, financing has made cars more attainable on paper, but it has not made them cheaper.
Seven-Year Loans Are Becoming Standard
To keep monthly payments manageable, lenders are extending loan terms. The average new-vehicle loan now spans nearly 69 months, with the fastest growth in loans exceeding 73 months. Six- and seven-year loans are increasingly common, particularly for higher-priced trucks and SUVs.
Used-car loans show a similar trend, averaging 68 months. While longer terms reduce monthly payments, they delay equity buildup and increase the risk of borrowers owing more than their vehicle is worth, a scenario known as being “upside down.” Cars depreciate quickly, and prolonged loans can leave owners financially vulnerable.
Regulators have cautioned that extended loan periods can exacerbate financial strain. The Consumer Financial Protection Bureau warns that longer auto loans may delay equity accumulation and heighten the risk of borrowers owing more than their vehicle’s value.
Credit Expands to Keep Demand Alive
Rising vehicle costs have also led lenders to expand financing to non-prime borrowers. Experian reports that subprime borrowers now represent more than 15% of auto financing, the highest share since 2021. While prime borrowers remain the majority, this trend reflects efforts to maintain affordability as prices climb.
Auto credit has grown significantly over the past decade. Federal Reserve data show consumer auto loan balances have steadily increased, making financing the primary tool for absorbing higher vehicle prices.
Early Signs of Financial Stress
While most borrowers continue to make payments, signs of strain are emerging. Experian reports that roughly 2.5% of auto loans are at least 30 days past due, with about 1% 60 days delinquent. Delinquency rates are rising alongside record loan balances and elevated payments.
The Federal Reserve Bank of New York’s Household Debt and Credit report mirrors these findings, showing growing pressure on household budgets as higher interest rates and vehicle costs coincide with increasing loan sizes. While delinquencies remain far below crisis-era levels, the upward trend suggests the market is approaching a delicate balance.
A Quietly Shifting Market
For now, the auto market continues to function. Cars remain expensive, financing makes them attainable, and buyers are still signing loans. Yet the landscape is changing: monthly payments are climbing into four-figure territory, loan terms are lengthening, and household budgets are under pressure.
Owning a car in America is no longer just about having a loan—it increasingly requires a larger, longer-term commitment, leaving less margin for error in an already costly market.
