by Record Auto Loans in the USA
For many Americans, buying a new car has become a difficult choice: either agree to higher monthly payments or enter into loan agreements that last almost as long as a mortgage. Due to constantly rising prices, more and more buyers are choosing longer loan terms to make payments more affordable. While this provides temporary relief, it has serious long-term financial consequences.
Financial Indicators and Trends
The average price of a new car in the US in recent years has hovered around $50,000, making it difficult to fit into a monthly budget.
According to Edmunds, almost one in five buyers in the second quarter of 2025 agreed to monthly payments exceeding $1,000—the highest figure in history at 19.3%. Loans with terms of 84 months (7 years) or longer also reached a record, comprising 22.4% of new financing.
Growing Popularity of Long-Term Commitments
Six-year loans are now the most common form of new car financing, occupying 36.1% of the market, followed by seven-year loans at 21.6%. In contrast, five-year loans, which were once the standard, have shrunk to about 19%. Shorter terms are becoming increasingly rare: only 6% of buyers choose four years, and only 4% choose three years. Meanwhile, the subtle return of eight-year (96-month) loans, which currently account for less than 1% but are steadily growing, serves as a warning sign.
Expert Opinion and Consumer Implications
Mike Schwartz, Vice President of Dealer Operations at Galpin Motors in Los Angeles, noted: “We try to steer customers away from the longest loans. We don’t want to put our customers in a situation where their life changes, and they come back for a trade-in while being in a difficult financial position. It doesn’t benefit them or us.”
Indeed, according to Edmunds, 26.6% of new car trade-ins in the second quarter of 2025 had negative equity—the highest percentage since early 2021—with an average customer debt of $6,754. This complicates trading in vehicles without accumulating debt, especially considering vehicle depreciation and repair costs after the warranty expires.
Loan Term Breakdown
| Loan Term | Share of New Auto Financing |
| 3 years | 4% |
| 4 years | 6% |
| 5 years | 19% |
| 6 years | 36.10% |
| 7 years | 21.60% |
| 8 years | <1% (but growing) |
Data via Bloomberg
Impact on Total Cost and Future Prospects
Of course, longer loans increase the total cost of the car. Ivan Drury, Director of Insights at Edmunds, noted that the average interest on an 84-month loan amounts to $15,460, which is approximately $4,600 more than on a five-year loan.
Drury added: “It’s clear that buyers are using limited options to manage affordability, whether through longer loans, more financing, or a smaller down payment, even if some of these decisions increase their overall costs. Consumers are constantly stretching their capabilities to afford new cars in this market, and while rates didn’t directly impact the second-quarter figures, they certainly won’t make life easier for buyers in the future.”
Leasing remains a viable alternative, but it also has its limitations. For many buyers, the choice is either to agree to higher payments or to lock themselves into loans that may outlast the car itself.
This situation points to deeper structural problems in vehicle affordability, where price growth outpaces income increases. Long-term loans may create an illusion of affordability, but they also increase financial risks for households, especially in conditions of economic uncertainty. The growing share of negative equity highlights that many Americans are becoming trapped in debt, limiting their future financial flexibility and opportunities for other major purchases.
