Car payments reached a record high in the United States as vehicle prices and borrowing costs continue to rise and loan terms get stretched.
A new analysis by The Century Foundation and Protect Borrowers found that aggregate auto debt has climbed 37% since early 2018 and reached the highest level ever recorded at $1.68 trillion. By the end of 2025, nearly 86 million Americans, or roughly 28% of consumers, carried auto loan or lease debt, according to the report.
The report found that the average monthly auto loan payment reached $680 in 2025, up 38% from 2018. For the lowest-income borrowers, the average payment was even higher, at $738, meaning they paid about $696 more per year than higher-income borrowers. Chief of policy programs at The Century Foundation, Angela Hanks, told CNBC that "People are seeing more and more of their paychecks eaten by their car payments."
The New York Fed's latest quarterly household debt report, released in February, showed auto loan balances rising by $12 billion in the fourth quarter of 2025 to $1.667 trillion. Total household debt reached $18.776 trillion, while credit card balances stood at $1.277 trillion and student loan balances at $1.664 trillion.
That debt load is part of a broader affordability problem that has outlasted the pandemic supply shocks. Experian reported that the average loan amount for a new vehicle reached $43,582 in the fourth quarter of 2025, up $1,882 from a year earlier. The average monthly payment for a new vehicle rose to $767. For used vehicles, the average loan amount climbed to $27,528, while the average payment rose to $537.
Borrowers are stretching payments over longer periods to stay in the market. Experian said nearly 30% of new vehicles financed in the fourth quarter had loan terms of 73 to 84 months, up from 26.03% a year earlier. Used vehicle loans showed a similar shift, with 73- to 84-month terms rising to 28.68%.
"Consumers and lenders are finding ways, such as extending loan terms, to make the financing fall within a budget," Melinda Zabritski, Experian's head of automotive financial insights, said in the report. She added that it will be important to monitor those trends over the next 12 to 18 months.
A potential danger is that longer loans can lower the monthly bill while raising the total cost of ownership. The Century Foundation found that extended-term borrowers still spend nearly 20% of monthly income on car payments, or almost $1 out of every $5 earned, over the life of a seven-year loan.
The New York Fed said 4.8% of outstanding household debt was in some stage of delinquency in the fourth quarter. Flows into serious delinquency for auto loans were 2.95%, slightly below 2.96% a year earlier, but still elevated for families already stretched by rent, groceries, insurance, and repairs.
Subprime borrowers are also returning to the market. Experian said they accounted for 15.31% of vehicle financing in the fourth quarter, the largest share in the fourth quarter since 2021.
The broader cost of owning a car is not easing enough to offset the debt burden. The Bureau of Labor Statistics reported that motor vehicle maintenance and repair prices were up 6.1% over the year in March, while new vehicle prices rose 0.1% for the month and used cars and trucks fell 0.4%.
Originally published on IBTimes
