Car Payments Now Average More Than $750 a Month. Enter the 100-Month Car Loan.

quote:

---

The price of new cars and trucks in the U.S. has increased 33% since 2020, and consumers are piling on interest as they stretch out loan terms to eight, nine and nearly 10 years.

David Kelleher, who runs a Dodge and Jeep dealership in Glen Mills, Pa., 27 miles west of Philadelphia, said many American families can’t comfortably take on a new-car payment these days.

“We don’t have $300 monthly payments any longer in new vehicles,” he said. “It’s a thing of the past.”

The average price of a new car broke the $50,000 barrier this fall, according to Kelley Blue Book. That is up from less than $38,000 in early 2020 before the pandemic hit. As sticker prices marched higher, so did monthly payments. For a few years, car shoppers were undeterred. Many needed new vehicles after putting off buying during Covid when supply chains were upended and dealer lots were empty. Others, feeling flush, opted for luxury vehicles at much higher price points.

Fast forward to November of this year and the average monthly payment for a new car was estimated to be $760, according to J.D. Power, an industry-research firm. The hefty cumulative inflation is starting to weigh on consumers, and now some Americans are falling behind on their car payments.

The struggle to keep monthly payments in check is so tough that the typical 48- to 60-month car-loan term has given way to 72-month terms, and longer, industry officials say.

---

quote:

---

The volume of loans with 85 to 96 months to repay, or up to eight years, rose as well to 1.61% of car buyers through October.

Some loans now reach 100 months, or more than eight years, especially for the purchase of larger pickups, Experian data show.

One problem is that automakers aren’t making models with a sticker price under $30,000, which, in theory, should present a real opportunity for the car companies, said Heath Byrd, chief financial officer of Sonic Automotive, a publicly traded dealership chain. He recently told investors and analysts that until buyers have better options, affordability will become an even bigger problem.

---

quote:

---

The White House is starting to stress the need for new cars to get cheaper. President Trump recently directed federal regulators to pave a path for automakers who want to sell tiny—and more affordable—cars in the U.S. that don’t currently meet government safety standards.

There are signs consumers would jump at the chance to buy them.

---

quote:

---

Some industry executives have justified longer loan terms because vehicles tend to stay on the road longer, thanks to improvements in technology and engineering. What is different now is the rapid rise in sticker prices, creating much bigger interest payments over time, said Michael Douglas, Chase Auto’s head of retail and consumer.

Customers are borrowing more to cover car costs, with the average new loan exceeding $42,000 this year, Douglas said.

---

quote:

---

For instance, a $50,000 car loan at 5% over five years works out to roughly $950 a month and $6,600 in total interest paid. At 100 months, the monthly payment would drop to about $600, and the borrower would pay more than $11,000 in interest.

---