How Americans Are Affording New Vehicles

If you've been shopping for a vehicle lately, you've probably experienced a little sticker shock.

The average new vehicle today costs far more than it did just a few years ago, and that has forced consumers to make some difficult choices. Some are buying less expensive vehicles. Some are keeping their current vehicle longer. And increasingly, many are simply stretching out their loan terms.

According to the latest State of the Automotive Finance Market Report from Experian, longer auto loans continue to gain popularity as consumers look for ways to keep monthly payments manageable.

Experian reports that more than one-third of all new vehicle loans now carry terms longer than 72 months. Loans exceeding 84 months are also becoming more common. The same trend is occurring in the used vehicle market, where nearly one-third of buyers are financing their purchase for more than six years.

Those numbers tell an important story about today's automotive marketplace.

The average amount financed for a new vehicle reached $43,925 during the first quarter of 2026, according to Experian. Average monthly payments climbed to $770. Used vehicle buyers financed an average of $27,070 and paid an average of $531 per month.

Those payment figures help explain why loan terms continue to lengthen.

For many buyers, the monthly payment is the most important number in the transaction. A vehicle that costs $50,000 may be out of reach on a five-year loan, but extending the term to six, seven, or even eight years can reduce the payment enough to fit a household budget.

I don’t see this as good news.

The good news is that vehicles today are more expensive than ever, but they are also lasting longer than ever. Twenty years ago, many vehicles struggled to reach 150,000 miles without major repairs. Today, it's not unusual for well-maintained vehicles to exceed 200,000 miles. As vehicle longevity has improved, consumers have become more comfortable financing them over longer periods.

Still, there are tradeoffs.

The biggest downside is negative equity.

Negative equity occurs when a borrower owes more on a loan than the vehicle is worth. Since vehicles depreciate fastest during the first few years of ownership, borrowers with long loan terms can remain upside down for years.

That's especially important when buyers trade vehicles frequently.

Historically, many Americans traded vehicles every three to five years. Today, consumers are keeping vehicles longer, but plenty of people still decide to trade before their loan is paid off. When that happens, any unpaid balance often gets rolled into the next loan.

That creates a cycle that can be difficult to escape.

I've seen it happen countless times over the years. A buyer rolls a few thousand dollars of negative equity into the next vehicle. Then they do it again. Before long, they owe substantially more than the vehicle is worth before they even drive it home.

Another consideration is what happens if the vehicle is stolen or totaled.

Insurance companies generally pay the actual cash value of the vehicle, not the loan balance. If a borrower owes significantly more than the vehicle's value, they could be responsible for paying the difference unless they have GAP coverage.

That's one reason GAP insurance has become increasingly popular as loan terms have expanded.

There was some positive news in the Experian report.

In the first quarter of 2026, consumers who refinanced lowered their average interest rate from 10.29% to 8.05%, reducing monthly payments by an average of $81 per month.

For some borrowers, refinancing may provide a better solution than extending a loan term even further.

The report also found that subprime lending increased modestly in both the new and used vehicle markets, suggesting lenders have become somewhat more willing to approve borrowers with lower credit scores than they were a year ago.

Despite the concerns surrounding long loan terms, it's important to remember that the loan itself isn't the problem.

The problem occurs when buyers focus exclusively on the monthly payment.

A lower payment often sounds attractive, but shoppers should always ask how long they will be making that payment and how much interest they will pay over the life of the loan.

A vehicle financed for 84 months may have a comfortable monthly payment, but that's seven years of financial commitment.

Before signing paperwork, buyers should understand the total amount financed, the interest rate, the total interest cost, and how long they plan to keep the vehicle.

Experian's report makes one thing very clear: Americans are adapting to higher vehicle prices by borrowing longer than ever before. Whether that's a smart financial move depends less on the loan term itself and more on how well the buyer understands the long-term consequences.