What is the average monthly car payment for Americans?
The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533. 39.20 percent of vehicles financed in the third quarter of 2023 were new vehicles.
| The average ... | New cars | Used cars |
|---|---|---|
| Monthly payment | $738. | $532. |
| Loan amount | $40,366. | $26,685. |
| Interest rate | 7.18%. | 11.93%. |
| Loan term | 67.87 months. | 67.40 months. |
Fast Facts on Cost of Car Ownership
Owning a car can get expensive, and the numbers don't lie. Owning a car costs an average of $10,728 per year or $894 per month. The cost of owning and maintaining increased by 10% from 2021 and crossed the 10K mark in 2022.
According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.
Per the study's definition of affordability, you shouldn't spend more than 17.5% of your after-tax income on cars. (That includes the monthly payment and operating expenses like gas and insurance.) Jerry says the average annual costs for a used car come in at about $12,200. New or used, your car is an investment.
How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.
This means that if a person earns $3,000 per month, a car payment that is greater than $300-$450 per month may be considered high. It's important to keep in mind that a car payment is just one of several expenses associated with owning a car, including insurance, maintenance, and fuel costs.
The average household's monthly expenses are $6,081 ($72,967 over the entire year). That's up from $5,557 ($66,928 over the entire year) in 2022. The average annual income after taxes is $83,195, up from $78,743 in 2022. Housing is the largest average cost at $2,025 per month, making up 33% of typical spending.
Auto loan debt is the second-largest category behind mortgages. Overall, Americans owe $1.607 trillion in auto loan debt, according to the Federal Reserve Bank of New York, accounting for 9.2% of American consumer debt.
Over 44% of Americans have auto loan debt. More than 1 in 4 car loans for used vehicles were made to borrowers with a score below 620. The typical car loan borrower will pay about $6,285 in interest over the life of a 5-year loan.
What is too much car payment?
However, you can run into some trouble after you sign if you ignore these payment troubles. Here are some important points to consider when getting into car payments. So, When Is a Car Payment Too High? According to experts, a car payment is too high if the car payment is more than 30% of your total income.
20% down — be able to pay 20% or more of the total purchase price up front. 4-year loan — be able to pay off the balance in 48 months or fewer. 10% of your income — your total monthly auto costs (including insurance, gas, maintenance, and car payments) should be 10% or less of your monthly income.
But no matter the reason for your $750 monthly car payment, the reality is that it's a lot of money. And if you're going from having no car payment to a payment of $750 a month, it could really constitute a shock to your finances. Here are a few steps you can take to cope with such a large car payment.
The 20/3/8 car buying rule says you should put 20% down, pay off your car loan in three years (36 months), and spend no more than 8% of your pretax income on car payments. As we go into depth to determine how realistic this rule is, you may consider whether it can actually help you budget for your next car.
That means that more than 60 percent of American households currently cannot afford to buy a new car, based on Census data.
Based on this criterion, 60 percent of households and 82 percent of individuals in the U.S. are currently unable to afford a new car. One contributing factor to this affordability challenge is the preference of Americans for pricier crossovers, pickups, and SUVs.
As a general rule of thumb, many experts suggest following the 20/4/10 rule, which holds that you should set aside 20% of a car's purchase price for a downpayment, take 4 years to repay your car loan, and ensure that your monthly transportation costs don't exceed 10% of your monthly income.
Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.
Traditional auto-buying wisdom says to focus on a total price first rather than a monthly payment because a monthly payment can become problematic if the dealer learns your budget. For example, if you want to keep your new car payment to $400 per month, the dealer might easily get your payments within your budget.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
Which is the most reliable car?
- Lexus NX (2014-2021) Reliability rating 99.8% ...
- Suzuki Swift (2017-present) Reliability rating 99.5% ...
- Lexus NX (2021-present) Reliability rating 99.4% ...
- Suzuki Ignis (2016-present) ...
- Toyota Yaris (2011-2020) ...
- Lexus UX (2019-present) ...
- BMW iX3 (2021-present) ...
- Hyundai Ioniq Hybrid (2016-2022)
It depends on how much income you have after your bills and expenses. But as a rule of thumb, your car payment should not exceed 15% of your post-tax monthly pay. For example, if after taxes, you make the U.S. median income of $37,773, you could shop for a car that costs up to $472 per month.
The answer is yes, almost 1 in 3 retirees today are spending between $2,000 and $3,999 per month, implying that $4,000 is a good monthly income for a retiree.
| 2022 | 2021 | |
|---|---|---|
| One person | $3,693 | $3,405 |
| Family of two | $6,372 | $5,782 |
| Family of three | $7,189 | $6,597 |
| Family of four | $8,460 | $7,749 |
Monthly cost of transportation
The second-largest spending category for the typical U.S. family is transportation.
