Nearly one in four new car buyers are taking out 7 year loans in order to make the purchase affordable. One in three new car buyers make less than $100,000 in household income. The average amount financed is $44,000, meaning that the average payment is between $700 and $900 per month. Pushing it out to 7 years gets that payment below $700.
That amount is “reflective of a market that favors large, expensive vehicles,” said Erin Keating, an executive analyst for Cox Automotive.
All I see now is people claiming how unaffordable it is to own a house or save for retirement, and they blame previous generations for playing life on “easy mode.” When I was growing up, my parents didn’t buy a new car until they were in their mid-40s, and that was a stripped down model with no air conditioning and only the AM radio that came standard with the car. There were manual, hand cranked windows. The only thing powered was the steering. The transmission was a standard.
A $43,899 loan at 6.9% for 84 months would result in a monthly payment of $660 and would cost you $11,575 in interest over the full life of the loan, but a five-year loan at the same rate would mean paying $8,132 in interest over the life of the loan — $3,443 less. But the monthly payment would jump to $867…40.7% of new-vehicle purchases involving negative equity are now financed with 84-month loans
Now, people are buying far more of a car than they can afford. They have all sorts of luxuries, spending on Door Dash, Starbucks, fake nails and eyelashes, streaming services, and sneakers costing several hundred dollars. That’s why life is becoming unaffordable- people got used to low interest rates allowing them to live far beyond their means, and now that rates are near their historical average, people can’t afford to keep that lavish lifestyle.
The historical average for a 30-year fixed-rate mortgage in the U.S. since 1971 is approximately 7.7%. While rates peaked over 16% in 1981 and bottomed under 3% in 2021, current rates in early 2026 have stabilized around 6.23%, close to the long-term historical average, but still a bit lower than the average. I remember the mid 80s, when car dealers bragged they had auto loan rates of 9.9% and people thought that was a great deal.
Gen Z is going to have to learn to live within their means.
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