New car buyers in the second quarter faced the highest financial burden on record, with nearly one in five paying over $1,000 a month for their auto loans, according to Edmunds.
Edmunds’ latest analysis shows that 19.3% of borrowers had monthly payments above $1,000 in the second quarter — the highest level since tracking began. This is up from 17.7% in the previous quarter and 17.8% in the same period in 2024.
Analysts attribute the rise to years of steady increases in new car prices combined with persistently high interest rates.
The average amount financed for a new car reached a record $42,388. The average interest rate stood at 7.2%, while the average monthly payment rose to $756, up about $16 from a year earlier.
To manage these costs, more buyers are opting for longer-term loans. Loans lasting 84 months (7 years) or more accounted for 22.4% of new car financing — a sharp increase from 20.4% in the previous quarter and 17.6% a year earlier.
Longer loans can lower monthly payments but increase total interest paid over time. They also raise the risk of “negative equity,” where the car’s value drops below the amount owed.
Joseph Yoon, consumer insights analyst at Edmunds, warned, “Loans over 84 months come with higher maintenance costs and residual value risks. If even 60–72 month loans are unaffordable, leasing should be considered.”
The average down payment for new cars fell to $6,433, declining from both the previous quarter and the same period last year. This suggests buyers are reducing upfront costs and relying more on financing.
Meanwhile, 0% financing offers have nearly disappeared, making up just 0.9% of deals — an all-time low.
Ivan Drury, director of insights at Edmunds, noted, “Consumers are using every tool available — long loans, bigger financing amounts, smaller down payments — to afford their purchases. But these choices ultimately increase total spending and could have long-term consequences.”
BY HOONSIK WOO [woo.hoonsik@koreadaily.com]
