Car buyers in the U.S. are facing tough times when it comes to affording new vehicles. Despite average down payments dropping to around $6,020 in the third quarter of 2025—the lowest in nearly four years—many consumers are still struggling to make new car purchases.
A recent report from Edmunds points out that the percentage of buyers with monthly payments over $1,000 remains high. This alarming trend shows that 19.1% of financed new car purchases are hitting this mark, just shy of the previous quarter’s record of 19.3%. The situation is even worse for used cars, where monthly payments over $1,000 surged to a record 6.1%.
Jessica Caldwell, Edmunds’ head of insights, commented on the situation, saying, “In Q3, affordability in the new-car market remained stretched, with buyers putting less money down, financing more, and extending loan terms to manage costs.”
Interestingly, the report also notes that more than one in five financed car buyers are opting for loans that last seven years or longer. Approximately 22% of new car loans extend to 84 months or more, just slightly down from the previous quarter but notably above 18.5% from the same time last year.
Buyers are increasingly taking out larger loans as well, with the average amount financed for new vehicles rising to $42,647, up from $42,388 in the previous quarter.
High interest rates are compounding these challenges, with the average annual percentage rate at 7% for the third quarter. This is the third consecutive quarter with rates above this threshold. The report highlighted that promotional financing has been limited, with only 3.4% of loans coming with a 0% rate. An overwhelming 71.6% of loans featured interest rates of 4% or higher, with 13.8% even surpassing 10%.
Analysts pointed out that a recent decision by the Federal Reserve to cut interest rates by 25 basis points came too late in the quarter to help those buying cars during this timeframe. The combination of high car prices, elevated interest rates, and mounting monthly payments creates a challenging environment for car buyers looking to make a purchase.
