U.S. Auto Loan Debt Soars to $1.68 Trillion Amid Rising New Car Prices and Shrinking Affordability

Americans now owe $1.68 trillion in auto debt as of the end of 2025, according to a new report from The Century Foundation and Protect Borrowers. This marks a 37% increase from the $1.23 trillion recorded in late 2018.

The average transaction price for a new vehicle has climbed to $49,000, up from roughly $35,000 to $37,000 a decade ago. Ivan Drury, Director of Insights at Edmunds, told CNBC that this represents a $12,000 to $14,000 increase in under a decade, while average incomes have not kept pace.

Cheap Cars Disappear as Prices Surge

Drury noted that the market for affordable vehicles has nearly vanished:

“There are virtually no new vehicles for sale under $20,000. Buyers who used to have options at the bottom of the market no longer do.”

Sean Tucker, Managing Editor at Kelley Blue Book, highlighted that automakers are increasingly targeting higher-income buyers. He pointed out that in 2017, automakers produced 36 models priced at $25,000 or less. Today, that number has dropped to just four.

Tucker also revealed that more than 43% of new vehicles are now purchased by households earning $150,000 or more, a record figure.

Monthly Auto Loan Payments Exceed $1,000 for Many Borrowers

In the first quarter of 2026, Edmunds reported that 20% of all auto loan monthly payments were at or above $1,000, up from 17% in 2025. The average monthly auto loan payment reached $680 in 2025, compared to $506 in 2018. However, low-income borrowers paid significantly more, averaging $738 per month.

The report also found that low-income borrowers carried average auto loan balances nearly $4,000 higher than households earning above $175,000 annually. Drury emphasized the financial strain this places on struggling families:

“A larger auto debt squeezes many households. That extra money has to come from somewhere, which could be groceries, rent, savings, the emergency fund…”

Higher Interest Rates Worsen the Burden

Interest rates have also climbed, with the average figure for the first quarter of 2026 at 6.9%, up from 6.7% at the end of 2025. Borrowers with credit scores below 580 may face interest rates exceeding 18%, resulting in an additional $14,000 in interest over a six-year loan term for a $30,000 car.

To offset rising costs, many consumers are extending repayment periods. In the first quarter of 2026, 22.9% of financed new car purchases involved repayment terms longer than six years.