What Percentage of Americans Have a Car Payment?

Vehicle payments represent a substantial portion of household budgets for many Americans. This overview clarifies their prevalence and the factors that influence them.

Current Statistics on Car Payments

As of the first quarter of 2025, approximately 100 million people in the U.S., representing about 29% of the population, have active auto loans they are repaying. For those with new vehicles, the average monthly payment was around $745 in Q1 2025, while used vehicle owners paid an average of $521 per month.

The average car loan term for new vehicles reached approximately 68.63 months in Q1 2025, with used car loans averaging about 67.22 months. The interest rates associated with these loans also vary significantly. In the first quarter of 2025, the average interest rate for new car loans was 6.73%, while used car loans carried a higher average rate of 11.87%.

Key Factors Influencing Car Payments

Several variables directly impact the size of a monthly car payment. A borrower’s credit score is a significant determinant, as higher scores generally lead to lower interest rates, which in turn reduce the overall cost of borrowing and the monthly payment amount. Conversely, a lower credit score typically results in higher interest rates, increasing the monthly obligation.

The vehicle’s purchase price also plays a substantial role; a more expensive car necessitates a larger loan amount, directly translating to higher monthly payments. Similarly, the amount of the down payment provided at the time of purchase reduces the principal loan amount. A larger down payment can considerably lower monthly payments by decreasing the total sum financed. The chosen loan term, or the length of the repayment period, is another important factor. Extending the loan term can lower monthly payments by spreading the cost over more months, but it often increases the total interest paid over the life of the loan.

How Car Payments are Calculated

Car payments are primarily determined by three core components: the principal loan amount, the interest rate, and the loan term. The principal represents the total sum of money borrowed to purchase the vehicle after any down payment or trade-in value has been applied. This is the base figure upon which interest is calculated.

The interest rate is the percentage charged by the lender for the use of the borrowed money, applied to the outstanding principal balance. This rate influences how much additional cost is added to the loan over its duration. The loan term specifies the number of months over which the borrower agrees to repay the loan. These three elements are then used to compute a fixed monthly payment that covers both a portion of the principal and the accrued interest throughout the repayment period.

Broader Trends in Car Financing

The automotive financing market is continuously shaped by broader economic and industry trends. One notable trend is the increasing average price of both new and used vehicles, which directly contributes to higher loan amounts and, consequently, larger monthly payments for consumers. This upward price pressure impacts affordability for many buyers.

Concurrently, there is a growing prevalence of longer loan terms, such as 72 or even 84 months, as a strategy to make higher vehicle prices more manageable on a monthly basis. While these extended terms can reduce the immediate monthly burden, they often lead to higher overall interest costs and a longer period of indebtedness. Shifts in interest rates across the broader market, influenced by economic conditions, also directly affect the cost of car loans. Elevated interest rates can make financing more expensive, impacting monthly payments and the total amount repaid over the loan’s life.