$1,000 Car Payments Hit Record Highs

• Nearly 20% of new car loans have monthly payments exceeding $1,000.
• More than 22% of borrowers opted for 84-month loans in the second quarter of 2025, representing a new high.
• These trends, along with high interest rates and lower downpayments, resulted in a record-high finance average of $42,388. 

Record-high new car monthly payments, record-high financed totals and record-high loan terms. American car shoppers broke several new car affordability records in the second quarter of 2025, according to a recent Edmunds report, a stark reminder that the $1,000-plus monthly car payment is evolving from an anomaly to an increasingly common occurrence.

Nearly 20% of new-car shoppers have agreed to monthly payments of $1,000 or more in the second quarter of this year (between April and June), according to Edmunds' sales data. More borrowers — exceeding 22% — are opting for 84-month loans, which nearly doubled from six years ago. Meanwhile, zero percent car loans have shrunk to less than 1%. Shoppers are making smaller down payments, and interest rates remain historically high at around 7%.

This affordability crunch translates to another record high for the average amount financed on a new car loan: $43,218 in October 2025, up from $41,362 in the previous year.

What’s driving these record borrowing trends? Part of it is automakers adjusting prices to compensate for tariffs, but it is also due to new-car shoppers trying to do more with less. In these cases, however, a bigger or fully loaded car now means more money later and less equity. 

"It's clear that buyers are pulling the few levers they can control to manage affordability, whether that's by taking on longer loans, financing more, or putting less money down — even if some of those decisions increase their total costs," said Ivan Drury, Edmunds' director of insights.

Record-high finance totals

Here's a breakdown of the three key factors contributing to this potential storm for borrowers. 

• Longer loans are more expensive: In Q2, the average financed cost of a new car on a 60-month loan was $38,205, up from $26,738 a decade ago. Those who took out 84-month loan terms financed even more, with an average of $50,959 (up from $36,764), according to Edmunds data.
• Shoppers want larger and more luxurious vehicles, and they’re willing to pay more later for the privilege of now. For example, the difference between the base price of a vehicle and the higher trim model that shoppers actually bought was a difference of about $11,500 — 33% over the vehicle's starting price.
•  The longer the loan term is, the smaller the down payment a person is likely to make: In the 60-month loan example above, the average down payment was about $10,326. Compare that to the average of $3,660 on an 84-month loan.

Monthly payments over $1,000

On the one hand, 30% of people who take on a $1,000-plus monthly payment are able to pay off the loan in three years or less. On the other hand, an increasing number of people (about 21% in Q2) take on similar payments but need six-year and seven-year loan terms to make the numbers work for them.

Most of these types of loans are for luxury brands, sports cars, electric vehicles and full-size SUVs. The average monthly payment for a Range Rover tops the chart at $1,589, followed by the Cadillac Escalade IQ and the extended version of the gas Cadillac Escalade. Mercedes, Porsche, BMW and Audi owners average monthly payments between $1,400 and $1,560, but mainstream vehicles such as the Ford Expedition, Chevrolet Tahoe, or the Ford Transit Cargo van, also creep into the highest monthly payment category. 

Luxury brands command higher prices, so it makes sense that the loan payments would be more expensive. 

Six years ago, in the second quarter of 2019, the percentage of loans with monthly payments exceeding $1,000 was 4.3%. Now it's 19.3%. Meanwhile, the price of a full-size luxury SUV has not even come close to quadrupling. 

Long-term loans increase the risk of negative equity

Stretching a loan out over time may lower the monthly bill, but it saddles the borrower with more debt. Since interest is typically front-loaded on an auto loan, the borrower may have less equity in the car if they decide to sell it before a seven-year loan term expires. It happens more often than you'd think. People often become bored with their cars, want to upsize into a larger vehicle after having a child, or even develop a case of buyer's remorse when they didn't pay close enough attention to the sales contract. Any of these scenarios could lead to a negative equity (also called  "upside down" or "underwater" on the loan), which occurs when a person owes more money on the car than it's actually worth.

"While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks associated with a loan extended that far into the future, including increased costs for upkeep down the line and the risk of being underwater on the loan if the car is traded in before it's paid off," said Joseph Yoon, Edmunds' consumer insights analyst.

When a borrower with a seven-year loan term trades in a vehicle with negative equity, any down payment the borrower makes will not touch the new car's financed amount. That money typically goes to reducing the negative equity on the trade-in rather than toward the new car. The remaining balance owed is then rolled over into the new loan. This, in turn, often leads to a higher interest rate, worsening the negative equity, and it becomes a vicious cycle of debt carried over into subsequent cars. 

In the second quarter of 2025, the average borrower who financed with negative equity paid $15,881 in interest, versus $9,619 paid by a borrower without negative equity, according to Edmunds data. 

This major downside of negative equity is one reason why Edmunds recommends a 60-month or five-year loan term. 

The affordability forecast is cloudy

These historic borrowing highs are likely to spell trouble down the road. 

"Consumers are continuously stretching to afford new vehicles in this market, and while tariffs haven't directly driven these Q2 numbers, they're certainly not going to make things any easier for shoppers moving forward," Drury said. 

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