Feb 17, 2026
Melissa Dickerson didn’t go shopping for an expensive SUV. She went looking for a replacement.
After her teenage son walked away from a serious crash, the Washington state paralegal needed another vehicle quickly — one that felt safe, familiar and reliable. What she wasn’t prepared for was how much the math had changed since her last car purchase.
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The $400 monthly payment she’d been used to was no longer an option. To get into a comparably used Acura, Dickerson found herself staring down a much steeper reality: a six-year loan, an interest rate deep in the double digits and a monthly payment of roughly $1,100.
That single expense reshaped her entire budget. As rent and other living costs climbed, the car payment crowded out essentials. Groceries, utilities and phone bills increasingly went on credit cards, not as a luxury, but as a stopgap. What started as a necessary purchase became a financial burden that now defines her monthly cash flow.
“Now I’m relying on the credit cards to live, to pay for things that I can’t pay now,” Dickerson told CNN (1). “Food and stuff you need — the electric bill, phone bill. You think you’ll be able to pay them off next month, and then you can’t.”
Dickerson’s situation may feel extreme, but it’s the new normal.
Four-figure car payments are no longer uncommon
Online vehicle guide Edmunds notes that more than 1 in 5 Americans pay $1,000 or more per month for a new car loan as of late 2025 (2). That’s up from 19.1% in the third quarter of 2025 and 18.9% in fourth quarter of 2024. That marks a concerning shift in how Americans finance their vehicles, reflecting record prices and stubbornly high interest rates.
"Faced with persistently high vehicle prices and borrowing costs, many consumers were forced to adapt by financing larger amounts, stretching loan terms and, increasingly, taking on four-figure monthly payments, “ said Ivan Drury, Edmunds' director of insights.
The average new car now costs around $50,000, according to Kelley Blue Book (3). Even used cars aren’t offering much relief. The average used-car payment is about $538 a month, close to the number paid for brand-new cars in 2019.
Longer loan terms are making these prices work on paper. Six-, seven- and even eight-year loans are increasingly common, allowing buyers to lower their monthly payment just enough to get approved. But that flexibility comes with a catch: borrowers stay locked into debt longer, often paying thousands more in interest.
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The hidden risks of stretching car loans
High monthly payments are a double whammy: they strain cash flow while increasing vulnerability.
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When a large chunk of income goes to a car, there’s less room for emergencies, rent hikes, medical bills or job disruptions. In Dickerson’s case, the car payment collided with higher housing costs, pushing everyday expenses onto credit cards and compounding the problem.
Long loan terms also raise the risk of being upside down, meaning you owe more than the car is worth. If the vehicle is totaled or needs to be sold early, borrowers can be left with debt, and no car to show for it.
Those risks are starting to show up in the data. Auto loans that are 60 days or more delinquent rose to 1.45% in the second half of 2025, according to consumer research firm TransUnion (4). While most people prioritize car payments to avoid repossession, rising living costs are making it harder to keep up.
How to stay above water
If you’re already stuck with a high car payment, the top priority is staying current. A repossession can wreck your credit and leave you scrambling for transportation. After that, focus on making the car last. The longer you drive it after it’s paid off, the more value you squeeze out of those painful payments.
For people shopping now, or looking for a way out, there are better options than defaulting to four-figure bills:
- Buying a smaller car: Downsizing, skipping luxury features or choosing reliable older models can reduce both the loan size and insurance costs.
- Shorter loan terms: Extending the loan may feel safer if the payment is unaffordable, but it almost always increases total interest paid and delays financial breathing room.
- Used doesn’t always mean cheap: Certified pre-owned vehicles or cars that are a few years old can still offer better value than new models, especially if depreciation has already taken its biggest bite.
Cars are more expensive, and high monthly payments are becoming the new normal. But making thoughtful choices, whether it’s downsizing, choosing a shorter loan or finding value in a used vehicle, can keep a necessary purchase from turning into a financial nightmare.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNN (1); Edmunds (2); Cox Auto (3); TransUnion (4).
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Chris Clark is a Kansas City–based freelance contributor for Moneywise, where he writes about the real financial choices facing everyday Americans—from saving for retirement to navigating housing and debt.
