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.
26 Comments
Robert · April 24, 2026 at 8:22 am
“Gen Z is going to have to learn to live within their means.”
The “means” available for Gen Z are considerably less than what was available to previous generations. And the “means” are insufficient to support the aspirations which are being sold to them.
Way too much has been and is being stolen by the government then distributed to useless grifters and cronies who have tight political connections. It is a middle-class and working-class liquidation economy which has been that way for many decades. We are beyond the practical limits of this system to continue.
To quote a movie line, “There is a storm coming”.
Divemedic · April 25, 2026 at 6:53 am
That is demonstrably false. While I certainly agree that taxes are too high, the standard of living being enjoyed by Gen Z is the highest one in history.
Robert · April 25, 2026 at 8:42 am
I seem to remember a quote, “You will own nothing and be happy”. That project is proceeding as planned. And who exactly will own the stuff that you are renting? The part about “be happy” is the deception. The owners do not care if you are happy or not.
That “highest standard of living in history that is enjoyed by Gen Z” is all based on rentals and debts. And they cannot afford the payments. “Living within their means” translates into a substantial reduction in those living standards. That is indeed what is happening.
Granted, there is critical value in avoiding debts and ruthlessly pruning back consumption to less than income. Gen Z has not been taught to do this and will face very harsh conditions if they do not figure it out on their own. The ones who do learn this will have a far more prosperous life than their peers who do not learn.
Steve · April 25, 2026 at 6:58 pm
Yes, you will own nothing and be happy because you are willing to rent a lifestyle. Supply and demand is an iron law. Once people stop buying at the prices being asked, those goods will be repriced because supply exceeds demand.
I agree it might be painful to convince enough of your cohort to live within their means, but until they do, there is no way to supply them with the amenities their parents had been able to afford after a decade or two of living within their means.
SiG · April 24, 2026 at 8:28 am
A little background: I bought this house in ’84 during the cleanup after the Jimmy Carter inflation of the late ’70s as Paul Volker was trying to undo that mess. We assumed the original buyer’s mortgage at 17% APR. Flat out insane, but better than what a couple of 20-something kids could get on our own. We only refinanced once and that when the APR dropped to around 9%. I haven’t thought about this in so long that I don’t remember real numbers, but we kept paying more than the required minimums and paid off the mortgage early.
The point of all that is to say the central banking system taught me to distrust them and their worldwide (dare I say) cabal. Real money, not this centrally-controlled, made up crap that’s barely in touch with reality.
Kids grow up thinking they’re going to always make more every year, but that’s an artifact of the inflation the Fed bakes into everything. Your paycheck may get bigger but that has nothing to do with the difference between what you make and your costs.
SP RN · April 24, 2026 at 8:40 am
No they won’t: they’ll be exploited by the communists who will promise them the life they want by taking it from ‘the rich’. They will vote all of us into ruin.
Elrod · April 24, 2026 at 8:54 am
What percentage of this is auto manufacturers loading up their cars with every bell, whistle, gizmo and gimcrack, then adding three layers of technology on top of the whole mess? As far as I can tell, not a single mfg produces what might be termed a “basic car” – simple, non-turbo gasoline engine, 4-speed awfulmagic trashmission (heaven forfend there’s a manual trans option), manually adjustable seats, etc. etc.Everything is full of “automatic this, self-something that, cameras, screens, driver assist something else, 12 speaker “entertainment” systems, and so on.
Doors that open and close, manual locks, brakes that work, AC that’s optional, and a wheel at each corner. But there’s no money in that, so let’s plaster it with crap and sell it for $60K.
Divemedic · April 25, 2026 at 6:55 am
Two reasons for that:
1 The government requires a computer driven car
2 The public demands all of the stuff like automatic this and that, so the automakers are making what sells.
Steve · April 25, 2026 at 7:03 pm
3. The public are suckers for, “Surely you deserve power windows. It’s only an additional $5.77 per month.”
Repeat for all the other options.
Until people start saying, “No, thanks, I can’t afford it. Manual windows are fine” they will keep getting nickel and dimed into poverty.
EN2 SS · April 24, 2026 at 9:07 am
That’s why when my wife died, I sold the house, bought an RV and a pickup to pull it, I bought a 2011 well taken care of Ram. Shopped new pickups and could not understand paying that kind of money for crap. I was an auto tech for 18 years, so I know crap when I see it.
C · April 24, 2026 at 9:08 am
You’re right, they buy more car than they can afford. But ever since cash for clunkers the used market still hasn’t recovered. Then they’re not much better in the low-option affordability type of vehicle either. A lot of that is due to government regs added over the last 30-40 years. I could probably sell a truck my father bought around 2001 for the same price he paid for it new.
Mike · April 24, 2026 at 10:12 am
I have never purchased a new car, it I do find it frustrating that basic, cheap, functional cars are simply not on offer anymore. The closest to a simple, cheap pickup is the Ford Maverick, but even that is usually offered in fancy (expensive) trims. I’d love to find a simple, cheap, reliable basic pickup.
Bill · April 24, 2026 at 10:41 am
Interesting you make this post. Yesterday my dad called and told me they are buying a new car. The “new” was in quotations. Its a used Lexus RX350. 11 years old 61k miles on odometer. They are paying 24k in cash. No loan, no debt. My folks taught me debt is slavery and if you can’t save up for a car don’t go into debt for one. These two can afford to buy a brand new Lexus at three times the price and pay cash. But even at 70 they are still buying used.
ghostsniper · April 24, 2026 at 11:44 am
You know, at some point, the borrower of that 7 year loan is going to be making payments on a ride that’s worth less than what he must continue to pay for.
I don’t know if I wrote that right. LOL
I can’t imagine doing such a thing. It’s like giving money away, every month.
I’ve only purchased 1 new ride in my life and it was in 1990 I bought a brand new S10, nothing fancy, small V6, stick, air, no electric anything. The selling price was $8888. and I put $1000k down and they gave me $300 for my old ride, the payments were $237.51 for 5 years, which I paid off early. I struggled on them payments a few times. That truck still ran good when I sold it for $300 2 years ago. Yes, I owned it for 34 years. I will most likely never own another new ride because I just can’t justify the exorbitant cost.
Peter · April 24, 2026 at 12:45 pm
Why is anyone buying a new car, for the most part it seems like a bad idea. Buy something a few years old and let someone else take the ~30-40% depreciation. Back in 2019 we bought a Honda CR-V that was 4 years old for $17K. It is still going just fine.
Birdog357 · April 25, 2026 at 6:50 pm
We bought a brand new 2021 Forester. We needed to replace our worn out 2009 and looking at the used market, it was either beat to hell or just off lease at nearly new prices. We got better loan terms on the new vehicle than we could have on a used one.
Georgiaboy61 · April 24, 2026 at 1:13 pm
Re: “Now, people are buying far more of a car than they can afford.”
In their defense, they have little choice. The multi-national car companies have formed what amounts to a cartel which excludes competitors – newer, smaller and more agile firms – from entering the business.
It is a peculiarity of business today that whereas small and medium-sized firms tend to favor free markets and competition, larger companies become socialistic and favor govt. intervention and regulation.
Why? Because EPA and NHTSA regs and red-tape exclude companies who cannot afford the vast army of lawyers, regulatory specialists and engineers required to meet these benchmarks. In effect, the small firms which might offer a stripped down affordable car or light truck – are forced out of the market.
Can’t speak for others, but I’d love to be able to purchase a bare-bones vehicle like those of half a century ago for a lesser price, but the govt. regs make building and selling such a vehicle nearly impossible in today’s domestic marketplace.
The big money men – the billionaire class – don’t want the hoi-poi driving at all, so they’re more or less OK with this state of affairs.
Don Curton · April 25, 2026 at 8:08 am
Thanks, that is exactly what I was going to say. The big three sends teams of lobbyists and truckloads of money to DC every year in order to create that gatekeeping regulations that allow them the monopoly they already have. I guarantee if some small start-up could legally build exact copies of that 1983 Datsun 4×4 pickup in the ad above, they’d be sold out before lunch for the next ten years.
Steve · April 25, 2026 at 7:09 pm
Who cares how much they spend on “lobbying”? The person/persons making the regulations are to blame for it, not the people lobbying them. It’s like qualified immunity in a way. They are never held responsible for the mess they make.
Call lobbying “bribery”, make offering a bribe legal, and offer a finders fee for turning in gov’t workers accepting a bribe. This crap ends in a week.
Hightecrebel · April 24, 2026 at 2:30 pm
Eh, when it comes to cars it’s not like a lot of choice exists out there. If you can find a used car in my area with under 180k miles it’s often at or above the original MSRP. And as for new ‘less expensive’ base model cars, local dealerships don’t stock them and aren’t willing to order them without tacking on excessive “special order” and delivery fees. This why my family is patching up our 250k mile Sienna instead of trading it in for something newer.
Jim · April 24, 2026 at 2:49 pm
It’s not unusual for me to drive past homes that are worth $250,000 and see three, sometimes four new cars. It’s a mentality that is foreign to me. Cars are and will forever be a depreciating asset. I laugh my ass off when I sit in morning traffic and watch the late model cars on their way to work.
Grumpy51 · April 24, 2026 at 5:13 pm
First truck I bought (used) was at 24% (1982) making $1325/month as a fire fighter in SE TX. Several years later (1986), $68K house was at 12%. One secret my grandparents taught me was – first 10% goes to church, second 10% goes to taxes, and third 10% goes to yourself (in savings) and that was based off gross, not net.
Slow Joe Crow · April 24, 2026 at 7:30 pm
Inflation is also a factor, I recently looked up the MSRP of my 25 year old pickup and adjusted for Inflation my modestly equipped 2WD 1/2 ton would be over $50,000. That at least explains new truck prices. I didn’t pay anywhere near that when I bought it used in 2020. Similarly my house was timed right and my mortgage was refinanced in 2021 at a cheap rate. I’ve bought two new cars in my life, with modest payments. I still have a tight budget despite never buying Door Dash and rarely buying coffee drinks. I guess living in Oregon is expensive but I’ve lived in Missouri and didn’t like it
Jester · April 24, 2026 at 7:47 pm
I will say this, between the inflation you mention so often and the safety mandates and all the items built in to a new vehicle you can’t exactly get the stripped down fleetside versions these days. I bought a new to me 23 Tacoma because it was the last year that had the V6 and did not have so many of the electronics. Still way to many but at least a tolerable amount compared to the newest vehicles rolling off the lines. Bottom line the income a household made, and the vehicles available made it so you could pay off loans in 4 years if you had one. Things are apples to oranges in that aspect. I’m not bitching or anything like that. I do also see folks living beyond their means on a daily basis. Not talking about an occasional door dash run or Starfucks Lattes. Those things add up in a hurry and I undoubtedly agree with you there. But, things are if not apples to oranges to those times you mention they are far in the rearview mirror. (See what I did there) The average cost for a new car is 50k. Alright, buy used like I have always done. Well between that thing called inflation, Covid still shaking things up, cash for clunkers there’s difficulty obtaining something used that’s safe and affordable that you could do as recently as 20 years ago. Oh and does not already have over 100k on it in the economy car markets. These vehicles are not something you can open the hood, get in to the engine bay and actually work on at home like vehicles from 20 years ago and further back. 50K is a huge chunk of an average income, and add that in to what housing costs and things become very constrained. I don’t often go out or live as a millenial, (Born in 81 and lived on a farm so I far more identify with Generation X even if I’m considered the bridge years) and work my tail off. I know that’s perhaps more uncommon but there’s a lot of folks I know that work, go to school, and live within their means too.
I do remember though that at one point in time as a kid with no credit, sure was hard as hell to get a vehicle loan in the early 2000s. I grant you this and perhaps it’s a further topic to think on. Just how easy it can be to get credit at this point in the decline.
Again I’m not as much disagreeing with you DM, but there is more going on for a lot of folks that did not effect things in years/generations past. Heck the Standard transmission is Automatic. Most vehicles out there don’t even have the option for a manual, and spoken as someone that misses them.
ribeye · April 25, 2026 at 4:04 pm
I’m not finding good extremely recent statistics but I’m pretty sure the average buyer of a new car is not particularly young. In 2015 the federal reserve claims over 1/3 of new vehicle sales were to people age 55+. FWIW in my own mostly 25-30 year old social circle not many people are buying new cars and the only ones I can think of paid cash.
Divemedic · April 25, 2026 at 6:11 pm
How much of that is just declining interest in driving? In 1980, 80% of 18 year old were licensed to drive. Today, its fallen to 60%.
https://coastlineacademy.com/article/average-licensing-age-in-usa-2026-report-why-teens-are-waiting-longer-to-get-licensed
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