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What's the Average Monthly Car Payment?

12 min.

If you want to purchase a car and do not have enough savings, an auto loan is your first option. As a car is a large purchase, it will affect your financial situation for a long time. So, be ready to do the math to figure out the most you can afford to pay each month.

What's the Average Monthly Car Payment?

These days, leasing or buying a car is more expensive than ever for the majority of American families. According to data from Experian, the average monthly car payment for new cars in the United States was $644 in the fourth quarter of 2021, while the average monthly car payment for a used car was $488 during the same period. The typical amount due for a monthly lease payment was $531.

Read this article to find out everything you need to know about the average monthly payment and get the best deal.

How Much is a Down Payment on a Car

High vehicle prices lead to costly monthly payments. You can avoid it by saving up for making a significant down payment. You can make a down payment from any available cash, the value of the car you're trading in, and any incentives you qualify for. You can save money before starting the financing process, and your credibility with potential lenders will increase.

In the case of an average new car payment, a 20% down payment is recommended, but a 10% down payment for a used car is adequate. According to data collected by Edmunds, the average cost of new vehicles in the third quarter of 2022 was $6,453, while the median used vehicle price was $3,700. Costs for brand-new car buyers rose by 30% compared to the beginning of 2021.

What the Car Payment Depends On

At the start of your car loan, you divide the total loan amount (principal plus interest) by the months until the loan is paid off. It gives you a monthly average car payment. Look at the factors determining the final cost of your auto loan debt's monthly payment. Borrowers can exert more or less influence over some of these elements.

  • Loan amount. The loan amount used to pay for the car will significantly affect regular payments. You can calculate the loan amount as a percentage of the vehicle's sale price. The principal is the cost of the car, which you must pay regularly.
  • Interest rates. You must pay interest on top of the principal amount when you borrow money. You can base the interest rate of your loan on several things, such as your credit history, the amount of debt you have, and your annual income. However, these things will vary depending on the lender you choose. The annual percentage rate (APR) is a better metric for comparing average interest rates among lenders because it factors in expenses.
  • Purchased vehicle and location. The interest rate you qualify for may also be affected by the car you decide to purchase. Some lenders, for instance, charge extra interest for a used automobile loan. The interest rate may be much higher if you buy a vehicle from a private party.
  • Taxes and other charges. Your auto loan or lease will likely include expenses you can roll into your average monthly car payments. Examples of such fees include taxes and vehicle registration fees.
  • Loan term. The time frame you must make monthly loan payments is known as the loan term. Auto financing terms are getting longer on average. Car loans are available with durations as long as 84 months or seven years' worth of payments. A more extended loan period usually means a lower average monthly car payment, but you will pay more interest overall.

How do Credit Scores Affect Monthly Car Payments

The ability to make loan repayments depends heavily on your credit score. But the effect on your auto loan debt could differ depending on the type of lender you use and their scoring system. The likelihood of obtaining a low-interest rate and lenient loan terms increases in proportion to the quality of one's credit score.

You should know that your credit score isn't the only element lenders look at when evaluating your application. The lender will consider your work history, credit score, and the percentage of your monthly income that goes toward debt payments. Even if your credit score is higher, you can get a better interest rate with an excellent financial history.

How to Estimate the Monthly Car Payment

While the averages can give you a sense of the vehicle loan market, it's essential to keep in mind that your situation may be unique. The average monthly payment for a car that credit companies report may be different from your payment.

You can get a reasonable estimate of your monthly car payment by using an online auto loan calculator. Calculate your monthly car payment by changing the purchase price, trade-in value, down payment amount, interest rate, loan length, etc. You can play around with the sliders until you find a monthly payment that works for your loan. Your monthly auto payment should be at most 10% of your gross income.

  1. Average car payments. Your credit score acts as your financial DNA. It gives potential lenders a sense of the risk associated with doing business with you until the alternative data movement catches up with current practices. Lenders with a long history of responsible financial behavior are more likely to offer you more favorable interest rates. And for the majority of people, this translates into cheaper monthly expenses.
  2. Average auto loan amount. The monthly cost of automobiles has seen consistent month-to-month growth throughout the past year. New vehicle prices reached an all-time high of $46,681 in November 2022, representing a year-over-year increase of $2,250. Because of these increased price tags, purchasers were required to finance a more significant amount of money to get their vehicles.
  3. Average auto loan rates. Shopping around with various lenders is essential to discover the most significant available rate. Before committing to a loan, looking into traditional and alternative banking options, including internet lenders, is a good idea. According to Experian's report on the state of the automated finance market for the third quarter of 2022, borrowers whose credit scores range from 781 to 850 are charged interest rates of 3.84% for auto loans secured by new vehicles and 3.69% for loans secured by used automobiles. On the other hand, individuals with credit scores ranging from 300 to 500 have an interest rate of 12.93% for new automobiles and a rate of 19.81% for used cars.
  4. Average auto loan terms. The standard loan term for a vehicle is 12 months. Terms of 24 to 60 months are the norm, with longer commitments of 72 and 84 months becoming more common. There is no "right" length of service because it depends on many things, such as finances and practical benefits. One advantage of a longer payback time is a lower monthly car payment at the expense of paying more for the loan overall.

How to Calculate the Car's Total Cost

You can plan for expenses outside of the regular monthly installment. Recurring costs like gas, insurance, and upkeep are included. However, it's wise to put away some cash in case of emergencies as well, at least enough to satisfy your insurance deductible. You'll need to do some rough estimating to get an idea of this number before committing to a new car.

  1. First, use a car maintenance calculator to figure out how much it costs on average to take care of your car.
  2. The next step is to include that sum in projected insurance premiums. Even though it's not required in all states, drivers should budget an average of $140 monthly for car insurance.
  3. Then, add in the money you expect to spend on gas. Calculate this figure by multiplying your car's average miles per gallon by your expected monthly mileage and then adding the cost of gasoline in your area to this total.
  4. Lastly, add the cost of the car's depreciation, registration, and applicable taxes and fees.


    What is a good monthly car payment?

    According to financial experts, spending more than 15% to 20% of your monthly take-home pay on your car (including the payment, gas, insurance, and maintenance) is a bad idea.

    Is $500 a month a high car payment?

    In 2019, a monthly payment of $500 for an auto loan would have been too high. But in 2022, when the typical monthly payment will be $648, you should count yourself fortunate if you still have only $500 to pay each month.

    What is the average monthly car payment in America?

    Experian reports that the median monthly payment for a new vehicle in the third quarter of 2022 was $700, an increase of 13.3% year over year. Meanwhile, monthly costs for new leases have increased to $567 (by 12.1%). With an increase of only 11.2%, the average monthly price of a used car is $525, which is the least.

    How much per month should I pay for a car?

    For instance, you can spend at most $4,200 a year if your household income is the national average (about $42,000). On the other hand, you can pay at most $6,200 on a vehicle if your annual household income is around the national average of $62,000.
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