Why has U.S. car loan debt climbed to $1.68 trillion, higher than credit card debt?

Auto debt hits $1.68 trillion

Cars have become one of America’s biggest monthly bills. A new report from The Century Foundation says U.S. auto loan debt reached $1.68 trillion in 2025, surpassing credit card balances and roughly matching student loan balances.

That number is huge because cars are not optional for many families. In much of the U.S., a vehicle is how people get to work, school, stores, doctors, and family.

U.S. auto loan debt tops cards

The rise in U.S. auto loan debt stands out because credit card debt usually gets more attention. NY Fed data for Q4 2025 put credit card balances at $1.28 trillion, while auto loan balances were about $1.66 trillion.

That comparison shows how deeply car costs are built into household budgets. Credit cards may cover groceries or emergencies, but auto loans often lock families into years of payments before the car is fully theirs.

U.S. auto loan debt keeps growing

The U.S. auto loan debt problem did not happen overnight. The Century Foundation report says auto debt has grown sharply since 2018, pushed by higher vehicle prices, higher interest rates, and longer loan terms.

For many buyers, the car payment is no longer a side bill. It can feel like a second rent payment, especially when insurance, repairs, registration, and gas are added. That makes one vehicle purchase a long-term financial commitment.

New cars cost nearly $50,000

One major reason debt is climbing is simple: cars cost more. Kelley Blue Book data from Cox Automotive showed the average new-vehicle price remained near or above $49,000 in early 2026.

That is a big jump from pre-pandemic prices. Automakers have also focused more on trucks, SUVs, and higher-end models. When cheaper choices disappear, buyers either stretch their budget, buy used, or take on longer loans.

Used cars are not cheap either

Used cars used to be the obvious backup plan for families priced out of new vehicles. That option is still cheaper than buying new, but it’s no longer the bargain it once was. Tight supply and strong demand have kept used prices elevated.

When used cars cost more, buyers borrow more for older, higher-mileage vehicles. That can be risky. A driver may still be paying the loan when repairs start piling up, making the car more expensive than it first looked.

Fun fact: Cox Automotive’s Manheim index showed wholesale used-vehicle prices rose 6.2% year over year in March 2026.

Longer loans lower monthly pain

Longer loans can make a car look affordable on paper. Stretching payments over six, seven, or even more years lowers the monthly bill, which can help buyers qualify. But it usually raises the total cost.

That is the trap. A lower payment can hide more interest, slower equity, and a longer time stuck with debt. If the car loses value faster than the loan shrinks, the owner can owe more than the vehicle is worth.

Fun fact: Edmunds-based reporting found about 21% of new-car loans ran 84 months or longer in late 2025.

Interest rates add pressure

Vehicle prices are only part of the story. Interest rates also make loans more expensive, especially for borrowers with weaker credit. A higher rate can add thousands of dollars to the cost of a loan over its life.

That hits lower-income buyers hardest because they may have fewer choices. They may need a car quickly for work, have less cash for a down payment, or be offered worse loan terms. The result is a bigger debt burden for people with less room to carry it.

Lower-income borrowers feel it most

The Century Foundation report found that auto debt weighs heavily on financially vulnerable households. Low-income borrowers had higher average auto loan balances than borrowers in the top income group, according to the report’s analysis.

That can sound backward, but it makes sense. Families with less cash may need to finance more of the purchase, accept longer terms, or buy at higher rates. A necessary car can become a debt cycle that is hard to escape.

New cars skew wealthier now

The new-car market is increasingly tilted toward higher-income buyers. Cox Automotive data cited by PBS showed that buyers earning under $100,000 made up 37% of the new-car market, down from 50% in 2020.

That means many middle- and lower-income families are getting pushed out of new vehicles. They may turn to used cars, keep older cars longer, or accept loans that stretch their budgets. Affordability is becoming the real showroom battle.

Delinquencies show stress

Auto loan stress is showing up in missed payments. Reuters, citing Fitch data, reported subprime auto delinquencies hit about 6.65% (60+ days past due) in October 2025, a record in Fitch’s series.

That matters because missing a car payment can quickly become serious. If a vehicle is repossessed, a person may lose the way they get to work. That can turn one missed payment into job trouble, credit damage, and even deeper financial stress.

Cars are tied to work

In many parts of the country, public transportation is limited or unavailable. That makes a car less like a luxury and more like a tool for keeping a job, picking up kids, buying groceries, and reaching medical care.

This is why auto debt feels different from some other debt. People may dislike the payment, but they still need the car. A household can cut streaming services or restaurant meals, but it cannot easily cut the vehicle that keeps daily life moving.

Car ownership has hidden costs

The loan payment is only the start. Drivers also pay for insurance, fuel, repairs, tires, registration, parking, and sometimes tolls. When car prices rise, several of those costs often rise too.

That can surprise buyers who focus only on the monthly payment. A $680 loan payment may fit the budget at first, but one repair bill or insurance hike can change the math fast. For many families, the true cost of owning a car is much larger than the sticker price.

For another auto cost update that could affect buyers, find out more about California’s planned workaround as electric vehicle tax credits vanish.

The debt warning is clear

America’s $1.68 trillion auto loan pile shows how expensive basic mobility has become. Cars are lasting longer and getting more advanced, but they are also pushing more buyers into bigger loans and longer repayment plans.

The warning is not that people should stop buying cars. Many cannot. The warning is that the car market has moved faster than household budgets can keep pace. Until cheaper vehicles, fairer loan terms, and better transportation options improve, auto debt may keep climbing.

For another auto policy fight that could affect car buyers and state rules, find out more about how Trump’s rollback of California electric vehicle rules set off a sweeping legal showdown.

Do you think rising car costs are pushing too many Americans into unsustainable debt? Share your thoughts and drop a comment.

This slideshow was made with AI assistance and human editing.

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