20% Of Car Buyers Trapped In Loans Longer Than Some Marriages

Affordability is a serious problem for new car shoppers and it doesn’t look like it’s going to get better anytime soon

Prices are going up just about everywhere you look, and car buyers aren’t getting a pass. In fact, the auto market may be one of the clearest examples of how far people are willing to go to afford something that used to feel more accessible. New sales data from the first quarter quantifies those lengths.

Put simply, people are stretching stretching their finances to get into new vehicles, and that trend doesn’t seem to be easing up anytime soon.

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For example, more new car shoppers than ever before are locking themselves into seven-year or 84-month loans. According to Edmunds data, in the first quarter of this year, 19.8 percent of US buyers went that route, a significant jump from just 13.4 percent in Q1 of 2019. Interestingly, short-term loans of 48 months or fewer are also seeing an uptick, rising from 7.1 percent in 2019 to 10.2 percent in 2025.

New Car Buyers Are Really Stretching Their Finances

Those willing to pay four figures for their car each month are holding steady at just over 17 percent. They’re also financing more than they were in 2024. In Q1 of last year, buyers financed an average of $40,427; this year, that figure has risen to $41,473. On top of that, Edmunds reports that 0% interest new vehicle loans accounted for just 1.1 percent of all loans. Meanwhile, average interest rates remain stuck at a historically high 7.1 percent—the same as in Q1 of 2024.

Here’s the kicker: all of this will most likely get worse with the Trump administration’s sweeping 25% tariffs on all imported cars and parts. Jessica Caldwell, Edmunds’ head of insights, stated: “When one in five new-car buyers are taking on seven-year loans, it’s clear how many consumers are still financially stretched.”

“Even with rates holding relatively flat, the continued reliance on extended terms and high monthly payments reveals how challenging car buying remains. And now, with auto tariffs officially taking effect today, there’s a risk that they will add fuel to the fire, triggering a disruption that could push vehicles even further out of reach for many shoppers.”

Quarterly New-Car Finance Data (Averages)

Could a Tax Break Tip the Scales?

There are a few developments that could shift the balance for buyers. For one thing, some automakers are offering new deals and discounts that could make their products more appealing. In addition, President Trump has floated the idea of allowing taxpayers to deduct interest paid on loans of American-made cars.

“In theory, a tax break like this could provide real relief to consumers, especially with total interest paid on a new-vehicle loan amounting to what could otherwise be used toward a home renovation project or vacation,” says Caldwell.

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Still, the proposal is full of unknowns. “There are still a lot of unanswered questions – from how ‘American-made’ would be defined to how this would be implemented and who would qualify. Until those details are clarified, it’s hard to gauge how much effect a policy like this could have on the market.”

For now, we’ll have to wait to see where the chips fall, but it would seem that used cars are looking better and better with each passing day. 

Quarterly Used-Car Finance Data (Averages)