It’s Undeniable That New Cars Are Expensive.
If you have visited your local dealership, scrolled through dealer listings on car-buying websites, or wasted hours of your life curiously poking around and drooling at pictures and 360 views of the newest cars on any automaker’s websites lately, you are probably more than aware that new cars are expensive. Many cars fall below this threshold, but the latest data available from Kelley Blue Book and Cox Automotive shows that the average new car in the U.S. cost buyers a whopping $48,039 in February 2025, a 1% increase from the same month in 2024 but a 1.3% decrease from January.
As a car-dependent nation, some buyers in the U.S. cannot wait for a promotion or sale to get a new car. Unfortunately, some buyers must take out auto loans with devastatingly high interest rates to get themselves into a new vehicle, which has bucked a disturbing new trend among new car buyers.
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Loan Terms Are Longer Than Ever, and APRs Are Higher Than Ever.
According to new data released by car buying authority Edmunds, new car buyers who finance their vehicles are increasingly getting themselves into the kind of auto loans worthy of Dave Ramsay and Caleb Hammer clips on TikTok.
Typically, a car loan can last from 60 months (five years) to 72 months (six years), with some going as short as 48 months (four years) or even 36 months (three years). However, economic conditions are forcing buyers to take out even longer loans than ever before. Edmunds’ analysts report that buyers who took out 84-month loans (seven years) hit an all-time high in the first quarter of 2025, making up 19.8% of new-vehicle financing. This is an increase from the same period last year, where 7-year loans consisted of 15.8% of new-vehicle financing in Q1 2024 and 13.4% in Q1 2019, five years ago.
At the same time, auto loans between 60 and 75 months trended downward. Though a large majority-67.4%-of buyers took out loans with these “normal” loan lengths in Q1 2025, Edmunds sees this as a downward trend. About 69.7% of buyers took out these loans in Q1 2024, and 77.7% did so in Q1 2019.
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This shift shows that buyers are willing to stretch and spread out their loan payments to get a lower monthly payment; however, some are still paying out the wazoo every month. Edmunds says that 17.7% of new car buyers had monthly payments that exceeded $1,000 in Q1 2025, a slight increase from the 17.3% figure in the previous quarter. To make matters worse, the average new-vehicle annual percentage rate (APR) in Q1 2025 was 7.1%, a slight bump from 6.8% in the last quarter.
In a statement, Edmunds’ head of insights, Jessica Caldwell, noted that though the auto financing market is stable, it doesn’t mean that cars are getting any more affordable. In fact, they caution that President Trump’s tariff plan on cars and car parts could further impair buyers’ ability to afford new cars.
“When one in five new-car buyers are taking on seven-year loans, it’s clear how many consumers are still financially stretched. Even with rates holding relatively flat, the continued reliance on extended terms and high monthly payments reveals how challenging car buying remains,” Caldwell said in a statement. “And now, with auto tariffs officially taking effect today, there’s a risk that they will add fuel to the fire — triggering a disruption that could push vehicles even further out of reach for many shoppers.”
Final Thoughts
Edmunds’ data paints an even bleaker picture for auto buyers in the United States. A Bloomberg report published last month even revealed that Americans are missing car payments at a rate not seen in over 30 years.
According to Fitch Ratings, 6.56% of subprime auto loan borrowers — those with credit scores of 640 and below — are behind on their payments by at least 60 days. In addition, New York Federal Reserve data shows that 3% of auto loan borrowers were in “serious delinquency,” meaning their payments were 90 days or more past due.
Further data released by Cox Automotive in late March 2025 shows that auto repossessions have surged to a level not seen since the Great Recession. In 2024, 1.73 million vehicles were repossessed from their owners, the highest level since 2009. At the same time, the repossession rate jumped to 2.3%, the highest level in about five years.