1 in 5 new car buyers are stuck in a $1,000-a-month nightmare — and it’s ruining their long-term wealth

And while his language is a little harsh, Ramsey is not exactly wrong. Debt of any kind can make it harder to save money and build wealth. And with the high cost of new cars today, auto debt, in particular, is hitting many Americans harder than it used to.

As the Washington Post reports, the average financed new-vehicle purchase is now $44,156, a new all-time high that’s recently forced many car buyers into large loans. In fact, according to Edmunds, one in five drivers who purchased a new vehicle in Q2 2026 are now paying $1,000 or more per month on their car loan.

“I shake my head, and I wonder what are people thinking,” Ivan Drury, director of insights at Edmunds, told the Washington Post.

Borrowers are agreeing to record-setting interest rates

Used-car buyers are also finding themselves locked into some very large loans. As the Post reports, the average amount financed for a used vehicle is currently $30,414, a price that’s forced 6.3% of used-car buyers into monthly bills that are $1,000 or more.

One factor that’s not working in favor of car buyers is the fact that 0% financing has essentially disappeared. During the pandemic, 24.2% of car buyers were able to lock in 0% financing, but that percentage has plummeted to just 1.2% since.

This, the Post notes, has contributed to borrowers taking out car loans with record-breaking interest rates — a 7% average for new vehicles and a 10.5% average for used cars. These car buyers often resort to stretching their loans to 84 months (seven years) just to make the monthly payments work.

But car prices and interest rates aren’t the only factors that are pushing buyers into pricey loans. Buyers often trade in their old vehicles when purchasing a new one, and as the Post notes, many are trading in vehicles that are worth less than what is still owed on the car.

This is known as an underwater loan, when the remaining balance on the loan is higher than the current market value of the vehicle itself. When a new-car buyer trades in a vehicle that’s underwater, the remaining negative equity on the old car loan is rolled into the loan for the new car. According to Edmunds’ data, the average owed total on underwater trade-ins was $7,183 in Q1 2026.

“There are very, very high odds, almost like 9 out of 10 odds, that you’re going to end up with a $1,000-a-month payment if you have negative equity,” Drury told the Post.

How big car debt can affect your finances

While debt of any kind can affect your finances, four-figure auto-loan payments can have serious financial consequences. Here are a few ways in which such car debt can affect your long-term wealth.

Saving for retirement

For many Americans, saving for retirement can be difficult. In fact, as Fortune reports, nearly four in 10 Americans who are near the end of their careers don’t have a retirement account.

Meanwhile, that $1,000 monthly payment on your auto loan could go a long way if that money were directed to retirement savings. In fact, even half of that monthly payment could boost your nest egg considerably over time.

The best way to free up money for savings is to avoid the four-figure auto-loan payment from the beginning, but for those who have fallen into this trap, paying off the loan is the first step. Once the loan is paid off, you could direct that monthly payment into your retirement savings.

Keeping a car that’s been paid off for as long as you can is also a good way to avoid monthly auto-loan payments. Sure, maintaining an older car can be costly, but the money spent on annual maintenance is likely to be less expensive than spending up to $12,000 per year on car payments.

“A $1,500 repair bill can sting, but it is better than $1,000-a-month payments for six or seven years,” the Post reports.

Paying off other debts

Throwing $1,000 at your car loan every month can also affect your ability to pay off other debts. Whether it’s credit card debt or student loans, these high-interest debts can wreak havoc on your finances if you pay them off over a long period of time.