Average New Car Price in the U.S. Surpasses $50,000
Ultra-Long-Term Loans Emerge Amid Rising Financial Burdens
Ultra-long-term auto installment plans of up to 100 months have emerged in the United States. This is because, as vehicle prices have soared, an increasing number of consumers are finding it difficult to afford monthly payments under the traditional 48- to 60-month installment plans.
Reference photo to aid understanding of the article. Tesla vehicles are parked outside the 'Tesla Center' in Gurugram, India. Photo by Reuters Yonhap News
According to a recent report by The Wall Street Journal (WSJ), new car prices in the U.S. have surged by 33% since 2020. As of this fall, the average new car price has exceeded $50,000, which is more than $12,000 higher than before the pandemic.
$760 Per Month Is the 'Average'... The Era of $300 Payments Is Gone
With the burden of higher prices, consumers are increasingly opting for long-term loans of 72 months or more instead of the traditional 48 to 60 months. According to consumer credit information company Experian, one-third of car buyers in the third quarter of this year used loans of six years or longer, and installment plans of up to 100 months have appeared, especially for large pickup trucks.
Market research firm JD Power estimated that, as of November, the average monthly installment payment for new cars reached $760. David Kelleher, who runs a Jeep dealership in Glen Mills, Pennsylvania, said that many American families are now struggling to afford new car payments, stating, "The days of paying $300 a month for a new car are over."
Low-Priced New Cars Disappear... Consumers Left With No Options
The problem is that alternatives to lower prices have all but disappeared. New car models priced under $30,000 are now extremely hard to find in the market. Heath Byrd, Chief Financial Officer of Sonic Automotive, pointed out, "With no low-priced models available, the burden on consumers can only increase," adding, "The issue of car prices is a structural risk for the entire industry."
Within this structure, the outstanding balance of auto loans in the U.S. continues to grow. According to the Federal Reserve Bank of New York, the total auto loan debt held by Americans has reached $1.66 trillion, up more than $300 billion compared to five years ago. As high living costs and interest rates compound, delinquencies are also increasing among some consumers.
Regulatory Easing in Motion... A Short-Term Reversal Unlikely
As rising vehicle prices increase the financial burden on households, the U.S. government has also begun to respond. President Donald Trump recently instructed federal regulatory agencies to consider easing regulations for automakers seeking to sell small, low-cost vehicles in the U.S. that do not meet current government safety standards. The aim is to encourage the entry of affordable microcars into the market to reduce the price burden.
However, most in the industry believe that the upward trend in vehicle prices will be difficult to reverse in the short term. As technological advancement, environmental regulations, and a preference for larger vehicles converge, analysts say consumers are likely to continue "owning cars by taking on longer-term debt" going forward.
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