20% of Car Buyers Stuck in Loans that Last Longer Than Some Marriages | Carscoops

      Affordability poses a significant issue for individuals shopping for new cars, and there seems to be no immediate relief in sight.

      Recent data on new car sales from the first quarter reveals a troubling trend. Buyers are increasingly opting for seven-year loan terms, with over 17 percent of them paying more than $1,000 monthly for their vehicles.

      Prices are rising in many sectors, and car buyers are not exempt. The auto market exemplifies how far individuals are willing to go to afford what used to be more attainable. New sales data from the first quarter illustrates these efforts.

      In simple terms, consumers are stretching their finances to acquire new vehicles, and this trend does not appear to be subsiding anytime soon.

      For instance, a greater number of new car shoppers are committing to seven-year or 84-month loans than ever before. According to Edmunds data, 19.8 percent of U.S. buyers chose this option in the first quarter of this year, a notable increase from 13.4 percent in Q1 of 2019. Interestingly, there is also a rise in short-term loans of 48 months or less, climbing from 7.1 percent in 2019 to 10.2 percent in 2025.

      New car buyers are indeed straining their finances. Those ready to spend four figures on their car payments each month are maintaining at just over 17 percent. Moreover, they are financing larger amounts than they did last year. In Q1 of the previous year, the average amount financed was $40,427; this year, it has increased to $41,473. Additionally, Edmunds reports that 0% interest loans for new vehicles accounted for only 1.1 percent of all loans, while average interest rates remain at a historically high 7.1 percent, unchanged from Q1 of last year.

      The situation is likely to worsen with the Trump administration's 25% tariffs on all imported vehicles and parts. Jessica Caldwell, head of insights at Edmunds, commented: "When one in five new-car buyers are entering into seven-year loans, it’s evident how many consumers are still financially strained."

      "Even with relatively stable rates, the ongoing dependence on extended loan terms and hefty monthly payments highlights the difficulties of car purchasing. With auto tariffs coming into effect today, there is a risk that these changes will exacerbate the situation, potentially making vehicles even less accessible for many buyers.”

      In terms of quarterly new-car finance data (averages), it raises the question: Could a tax break make a difference?

      Some potential developments could shift the dynamics for buyers. Certain automakers are currently introducing new promotions and discounts that might enhance the appeal of their vehicles. Additionally, President Trump has suggested allowing taxpayers to deduct the interest on loans for American-made cars.

      “In theory, such a tax break could provide substantial relief to consumers, particularly when the total interest on a new vehicle loan could otherwise be allocated towards home renovations or vacations,” notes Caldwell.

      However, the proposal is laden with uncertainties. “Numerous questions remain unanswered – from the definition of ‘American-made’ to the implementation process and eligibility criteria. Until these details are resolved, it’s difficult to assess the potential impact of such a policy on the market.”

      For now, we must wait to see how things develop, but it seems that used cars are becoming increasingly attractive with each passing day.

      Quarterly used-car finance data (averages).