What used to be a manageable monthly expense has now ballooned into something closer to a second rent. With new car prices hovering near $50,000 and fewer affordable models on the market, many buyers are relying on extended financing to make ownership feasible. Nearly 80% of new cars and 35% of used cars are purchased with financing, making loan structure a central issue in today’s auto market.
As more Americans turn to financing, disparities between credit tiers are becoming more apparent. Borrowers with weaker credit scores face not only higher payments but also much steeper interest rates, even for smaller loan amounts. The gap in what consumers pay and how long they pay continues to grow, reshaping the way Americans experience car ownership.
Loan Amounts and Durations Reach All-Time Highs
The typical new car loan now exceeds $42,000, while average used car loans are over $27,000. To keep monthly payments somewhat manageable, lenders have pushed terms out to an average of nearly 70 months for new vehicles. That translates to almost six years of monthly payments, a timeframe once associated with only high-end purchases.
These extended terms are becoming the default, especially for consumers trying to qualify for loans on higher-priced vehicles. New car buyers in the prime credit tier (661–780) carry average loan amounts of $44,480, with repayment stretching over 72 months. Those classified as new prime (601–660) go even further, with terms of 75 months on average and monthly payments nearing $793, according to Experian.
Despite these adjustments, the monthly cost remains high for most buyers. While longer terms help reduce individual payments, they increase the total interest paid over time, especially for borrowers in less favorable credit brackets.
Credit Scores Define the Car Financing Experience
The cost of financing varies sharply by credit profile. Super prime borrowers (scores between 781–850) secure the lowest average interest rates, around 4.88%, and pay $727 per month for loans averaging $40,534. At the other end, deep subprime borrowers (scores between 300–500) are paying the same $748 monthly, but with interest rates of 15.85% on significantly smaller loans averaging just $35,286.
Near-prime borrowers, with scores between 601 and 660, are hit the hardest. Their average payment of $793 per month is the highest among all tiers, despite interest rates of 9.77%. Meanwhile, subprime borrowers (501–600) pay $780 per month, with average rates of 13.34%.
This tiered structure reveals how limited credit access drives up both short-term and long-term costs. A lower credit score doesn’t just mean a smaller loan; it often results in a higher monthly bill and more interest paid overall, creating a heavy financial burden for already stretched households.
Used Vehicles No Longer a Budget Alternative
Used car financing no longer offers the relief it once did. The average monthly payment on aused vehicle hit $532, based on an average loan amount of $27,128. While that’s lower than new car payments, the gap is shrinking fast.
The breakdown by credit tier shows similar trends to the new car market. Deep subprime used car buyers are paying $556 monthly on loans of just $21,149, with interest rates as high as 21.60%. In contrast, super prime buyers pay $527, creating a relatively small monthly difference of $29, but a $348 difference per year.
These numbers suggest that for buyers with limited credit, even opting for a used vehicle doesn’t significantly reduce financial strain. While loan sizes are smaller, interest rates more than cancel out those savings.
