Car Payments Now 40% of Average U.S. Rent Costs
Monthly car payments have climbed so high that they now rival a major household expense most Americans consider far more essential, and the ripple effects on savings, home ownership, and debt are reshaping how families manage their money.
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The average monthly car payment for a new vehicle bought in the second quarter of the year is $765, according to credit firm Experian. To reach that number, the research included down payments, total loans, loan term, and credit history. The average total loan amount for the same car is $43,610. The average interest rate is 6.65%. The average term is 70 months.
The amazing figure is that this payment has reached 40% of what average Americans pay for rent each month. That is for a 900-square-foot apartment. However, the $765 payment is 81% of the average rent of $1,080 in Oklahoma, the best ratio between rent and car payment.
No wonder the new car market is struggling. But is it?
How does a high car payment affect a person’s finances? Maybe it prevents them from buying a new home. According to The Washington Post, “A $1,000 loan payment could disqualify you for a loan, because you are so heavily indebted.” In essence, people are trading a new car for a house.
The high loan payment can also cut into the ability to save for retirement. Add to that the ability to make payments on credit cards, which can have interest rates as high as 25%. In other words, a new car can steer people’s entire finances.
Yet another problem is what a car is worth after 70 months. It’s likely worth less than the car loan balance. By then, a car’s value has usually dropped 40% from the original purchase price. Put another way, the car’s equity is less than the loan balance. However, some people cannot afford a new car unless payments are spread over a long period, which lowers monthly payments.
Interestingly, these high payments do not appear to be hitting new car sales. New car sales run about 16 million a year in the US. Kelley Blue Book reports this is about the same pace as it was in 2025. Car companies do not have to worry about car prices, so far.
How can Americans get lower payments? The monthly payment for a used car is $542. Because used car loans are riskier than those for new ones, interest rates on loans can top 10%.
Americans have one other choice, which is to keep the cars they have. The average age of a car on the road has risen to 12.8 years, according to S&P Mobility. That is the highest level in history.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
