Americans are purchasing new vehicles on loan more than ever before, with 1 in 4 citizens, totaling 86 million people, having an outstanding auto loan or lease debt. This is despite a significant rise in vehicle prices over the last few years.
America’s total auto debt reached $1.68 trillion at the end of 2025, which was a big rise of 37% since late 2018, when the debt was $1.23 trillion, according to a report by CNBC.
While new vehicle prices have risen significantly, American incomes have not seen an equal rise, leading to an increase in the number of car loans.
Gas prices have also risen in the last four weeks, courtesy of the military conflict in the Middle East, but that has not led to a reduction in auto debt in the economy.
Consumer Paychecks Being Taken Away by Their Cars
The Century Foundation, a consumer advocacy group, told CNBC that the average auto loan was $24,782 in the fourth quarter of 2018, which jumped to $33,519 at the end of 2025. The same period saw monthly auto loan payments increase from $506 to $680.
Angela Hanks, chief of policy programs at The Century Foundation, said:
“People are seeing more and more of their paychecks eaten by their car payments.”
Americans have access to more expensive vehicles through the convenience of loans, despite the vehicles being financed at high interest rates. That leaves them with two choices- either have a higher monthly payment for a short duration, or have a lower monthly payment for a much longer repayment term.
Buyers Left Without Affordable Options in the Car Market
The price per vehicle transaction is nearly $49,000, $10,000 higher than the 2018 prices that hovered between $35,000 and $37,000, according to Edmunds.
Ivan Drury, director of insights at Edmunds, said:
“That’s a $12,000 to $14,000 move in less than a decade, and incomes haven’t kept pace.”
He added:
“There are virtually no new vehicles for sale under $20,000.
“Buyers who used to have options at the bottom of the market no longer do.”
Sean Tucker, a managing editor at Kelley Blue Book, said car models priced under $25,000 have reduced significantly in the last decade:
“In 2017, [automakers] built 36 models priced at $25,000 or under. Today? Four.”
He also added that more than 43% of new cars are purchased by customers who have incomes of more than $150,000, meaning automakers are now catering to higher-income buyers, who remain unaffected by macroeconomic factors, disasters, or pandemics.
Due to this trend, low and middle-income customer groups are relying on big loans to be able to afford cars. The Century Foundation states that those earning under $35,000 a year pay an average of $738 per month, much higher than the $680 average in 2025 mentioned earlier.
The report added that 20% of financed vehicles were purchased by buyers who were willing to pay monthly installments of $1,000 or more.
Rising Interest Rates
According to Edmunds, the average interest rate for new vehicle purchases increased from 6.7% at the end of 2025 to 6.9% in the first quarter of 2026.
Customers with a low credit score ended up with interest rates of over 18%, meaning for a $30,000 car, a customer would pay interest worth $14,000 over a period of six years.
Recent figures revealed by Edmunds suggest that more than 1 in 5 financed vehicles included a loan term of seven years or longer at the start of 2026. Drury said:
“The longer these loans stretch, the harder it is to ever get out from under them.”