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- In the fourth quarter, nearly 1 in 5 new car buyers agreed to monthly payments of $1,000 or more.
- Interest rates remained high.
- However, some relief may be in store in 2026 as more lease-off vehicles are returned to the market.
2025 was marked by an affordability struggle as new and used car prices soared, interest rates remained high and buyers took out the longest loan terms ever to get behind the wheel, according to new data from Edmunds.com.
Experts predict some of the same pressures will continue into 2026, but there may be some relief ahead, at least in the used car market.
Regarding the new car market, Edmunds predicts that new car sales in the United States will reach 16.3 million units in 2025 and 16 million units in 2026, citing factors such as interest rate easing and new car transaction prices flattening out after several years of rapid price increases, which will continue to support sales. Therefore, although new car prices will remain high, they should remain stable until 2026.
Edmunds released its fourth quarter data on January 5, showing that various records were broken, including the highest percentage of new car buyers who committed to monthly payments of $1,000 or more, a new record for average monthly payments, and a new record for average loan amount.
“The auto financing trends in the fourth quarter underscored how challenging 2025 is for car buyers,” Ivan Drury, director of insights at Edmunds, said in a statement. “Faced with persistently high vehicle prices and borrowing costs, many consumers have been forced to adapt by financing larger amounts, extending loan terms and reaching four-digit monthly payments. The record numbers we are seeing reflect the financial strain many buyers face throughout the year.”
The average transaction price for a new car in November was $49,814, up 1.3% from the same month last year and about the same as October’s $49,760, according to Kelley Blue Book. Data for December is not yet available. However, J.D. Power reported late last month that the average new car retail transaction price for all vehicles in December is expected to be $47,104, an increase of $715 compared to December 2024. Excluding electric vehicles, the average price of non-EVs increased by 1.4% compared to December 2024 to $46,807.
“Retail consumers will spend a total of $620 billion on new vehicles in 2025, an increase of 5.8% year over year,” Thomas King, president of OEM Solutions at J.D. Power, said in a media release.
One-fifth of car buyers agree to $1,000 a month
Edmunds’ fourth-quarter U.S. auto sales data shows more car buyers than ever before are agreeing to make monthly payments of $1,000 or more. The percentage of new car buyers who committed to making these monthly payments reached a record high of 20.3% of all new car purchases financed, up from 18.9% in the fourth quarter of 2024.
In the used car sector, 6.3% of buyers committed to monthly payments of $1,000 or more, also a new record, compared with 5.4% in the fourth quarter of 2024, Edmunds said.
This may sound alarming, but this is a story that continues throughout 2025. As the Detroit Free Press reported in the second quarter, the percentage of new car buyers committing to monthly payments of $1,000 or more hit a record high of 19.3%, according to Edmunds data. This was an increase from 17.8% in the second quarter of 2024.
Lease and employee discounts are popular in metro Detroit and lower monthly payments, so monthly loan terms and payments here are much lower than the Edmunds national average, Chevrolet and Ford dealers said.
Drury explained why some of these records are being broken. First, President Donald Trump’s 25% tariffs on imported cars and auto parts are driving up prices, with many automakers passing the increases on to destination fees. As the Detroit Free Press reported last month, most automakers are grappling with raising the non-negotiable rates they set, which cover manufacturers’ costs of transporting vehicles from factories to dealerships.
Within the past year, the Detroit automaker has increased destination fees for its entire lineup of pickups under the GMC, Chevrolet, Ford and Ram brands from $1,995 to $2,595 for the 2026 model year.
But Drury added that there are three factors that are a little more important than tariffs and fees.
“Luxury brand purchases are on the seasonal side, up as usual compared to the third quarter, which always drives up the fourth quarter numbers, but secondly, it’s the method of acquisition. More luxury buyers are choosing to use cash/check rather than dealer financing, external financing or leasing,” Drury said. “With more luxury consumers relying on dealer financing, the overall financing mix will capture a healthy amount of high-value transactions.”
Car buyers are borrowing more than ever
The average monthly payment for a new car has reached an all-time high, according to Edmunds data. The average monthly payment for a new car in the fourth quarter was $772, compared with $754 in the same period last year.
The average loan amount for a new car jumped to an all-time high of $43,759, compared to $42,113 in Q4 2024.
Part of the problem is that buyers of both new and used cars make small down payments to reduce the amount they finance. The average down payment for a new car in the quarter was $6,228, compared with an average down payment of $6,856 in the fourth quarter of 2024, according to Edmunds data. For used cars, the average down payment for the quarter was $3,956, compared to $4,219 in the year-ago period.
Edmunds data also showed that longer loan terms continue to play a big role in how people finance new cars. Almost 21% of new car purchases financed in the quarter were for loans of 84 months or longer. While this number is slightly down from 22% in the third quarter, it is well above the 17.9% in the fourth quarter of 2024 and “confirms that consumers continue to rely on loan term extensions as an affordability tool,” Edmunds said in a statement.
Interest rates fell only slightly. Edmunds analysts said the average annual percentage rate (APR) for new car purchases was 6.7% in the quarter, compared with 6.8% in the fourth quarter of 2024, but remains near historic highs and promotional funds remained limited in the quarter. According to the data, only 3.1% of new car loans have an interest rate of 0%, up slightly from 2.4% in the same period last year.
“Signs of future rebalancing”
Looking to the future, Drury said many affordability issues still exist, including high new car prices and economic uncertainty.
“That said, there are early signs of a rebalancing,” Drury said. “New car prices remain high but are beginning to stabilize, lower interest rates may provide some relief to both new and used car buyers, and increased post-lease revenues are expected to provide more affordable alternatives in the used car market.”
About 400,000 vehicles are expected to be returned when their leases end this year, Edmunds said. Additionally, the average trade-in age is rising, putting owners back in the market for new cars.
Still, most analysts believe the auto industry will continue to face economic uncertainty and declining consumer confidence in 2026, with affordability of new and used cars remaining a key challenge. They point to the impact of President Trump’s auto tariffs and material cost increases, along with the sudden end of federal tax breaks for electric vehicle purchases, all of which will be fully realized in 2026.
When President Trump’s first term is combined with the renegotiation of the U.S.-Mexico-Canada Agreement, the free trade agreement that replaced NAFTA, the industry will face unknown unknowns in 2026 that could impact the industry.
“If you’re a high-income buyer with good credit, you’ll have options, availability, and reasonable financing. That’s good news,” Cox Automotive executive analyst Erin Keating told the Detroit Free Press last month. “However, if you are an average-income household looking to buy a car, the decision can be a little more difficult as you may not have the confidence needed for a big-ticket item.”
Jamie L. Lareau is senior auto writer for USA Today and covers Ford Motor Company for the Detroit Free Press. Contact Jamie at jlareau@freepress.com. Follow her on Twitter @Jalalean. To sign up for our automotive newsletter. become a subscriber.
