It’s Official: Americans Can’t Afford New Cars Anymore

One in Five Buyers Now Pay $1000 Monthly

In September 2025, the average price of a new car in America crossed $50,000 for the first time.

The cheapest new cars have disappeared from dealer lots entirely, and the ones that remain cost more than a used car did just five years ago.

Buyers are stretching their budgets with seven-year loans and shrinking down payments, and more than a quarter of them owe more on their current car than it’s worth.

The math has gotten so bad that buying a car now feels less like a purchase and more like a second mortgage.

September 2025 Breaks the Record

The average sale price reached $50,080 in September 2025, marking the first time it has topped $50,000, according to Kelley Blue Book.

The record was partly driven by luxury models and EVs, which pushed the market into new territory. EVs made up 11.6% of all new vehicles sold that month, also a record high, with the average EV selling for $58,124.

The milestone came as shoppers rushed to buy electric vehicles before a $7,500 federal tax credit expired on September 30.

That one-two punch of EV demand and luxury sales tipped the average past a number that would have seemed absurd a decade ago.

The Last Cheap Car Disappears

The subcompact Mitsubishi Mirage was the only new car selling under $20,000, and the manufacturer discontinued it in the U. S., with the 2024 model being the final edition. The 2025 Nissan Versa now stands as the only new car with a starting price under $20,000, at $18,330 including destination.

But Nissan will end production of the Versa after the 2025 model year, meaning the sub-$20,000 new car will officially go extinct.

Top-selling cars like the Honda Civic and Toyota Corolla had MSRPs under $20,000 as recently as 2019. Those days are gone.

Budget Cars Collapsed in Six Years

In February 2025, the share of overall new auto sales under $25,000 was 4. 8%, according to Edmunds, down from 23% during the same month in 2019.

That’s a collapse from nearly one in four sales to fewer than one in twenty.

Throughout the 2010s, entry-level models like the Chevrolet Spark, Hyundai Accent, Ford Fiesta, Toyota Yaris, and Mitsubishi Mirage made up a quiet but vital portion of the market.

They were accessible, fuel-efficient, and simple to maintain, but over the past few years, nearly all of them have been discontinued.

Automakers Gave Up on Cheap Cars

The budget car didn’t die from lack of demand. It died because automakers make more money selling expensive vehicles.

Analysts have estimated margins on the Ford F-150 to be around 20% per vehicle, and that F-150s account for 90% of Ford’s total profits.

The Maverick, Ford’s attempt at an affordable truck, came with what one analyst called a “tiny” profit margin.

Carmakers are increasingly prioritizing the production of SUVs, trucks, and electric vehicles, which are all segments where profit margins are significantly higher than those for a subcompact or compact car.

Selling one well-equipped SUV is often more profitable than selling several economy cars.

Record Buyers Pay $1000 Monthly

The share of new-car buyers committing to monthly payments of $1,000 or more hit an all-time high of 19. 3% in Q2 2025, compared to 17.7% in Q1 2025 and 17. 8% in Q2 2024.

That rate has increased roughly sevenfold in the past decade. Back in 2015, only 2.4% of buyers who financed their cars paid over $1,000 monthly.

The average new car payment is now $756, but that number masks how many buyers have crossed into four-figure territory just to drive something off the lot.

Seven-Year Loans Hit All-Time High

Loans lasting 84 months or longer set a new record in Q2 2025, accounting for 22. 4% of new-vehicle financing, up from 20.4% in Q1 2025 and 17. 6% a year ago.

Buyers are stretching payments over seven years to make the monthly number look affordable, but the tradeoff is brutal.

Borrowers with 84-month loans face a median negative equity of negative $8,485, while those with shorter 36-month terms have a positive median equity of $7,783. The longer the loan, the deeper the hole.

Buyers Finance More With Less Down

The average amount financed for new vehicles climbed to $42,388 in Q2 2025, an all-time high, up from $41,473 in Q1 2025 and $40,873 in Q2 2024.

At the same time, the average down payment for new-car purchases was $6,433 in Q2 2025, down from $6,511 in Q1 2025 and $6,579 in Q2 2024.

Buyers are borrowing more and putting less skin in the game, which sets them up for trouble the moment they drive off the lot.

One in Four Trade-Ins Underwater

About 26. 6% of trade-ins toward new car purchases had negative equity in the second quarter of 2025, according to Edmunds. That’s up from 26.1% in the first quarter of the year and the highest it’s been in the last four years. The average amount owed on upside-down loans was $6,754.

When these buyers trade in, they roll that debt into a new loan.

According to Edmunds, buyers who had negative equity on their current vehicle and rolled it into a new vehicle loan paid an average $915 per month, compared to an industry average of $756.

Tariffs Cost Billions but Prices Held

Tariffs have been costly for the auto industry. Higher taxes on imports like aluminum and steel are pushing up the prices of materials, while tariffs on foreign-made parts and imported vehicles have been as high as 25% since the spring.

But so far, sticker prices haven’t exploded. Automakers have been absorbing the loss.

In calls with investors, automakers laid out their tariff bills for the last three months: $1. 1 billion for General Motors, $600 million for Hyundai, more than $500 million for Kia, $1.5 billion for Volkswagen. Both analysts predict that when 2026 model year vehicles arrive, prices will rise 4 to 8%.

Owning a Car Costs $1200 Monthly

The sticker price is just the beginning. Americans spend an average of $177 a month on fuel, and the national average cost of auto insurance with liability, collision, and comprehensive protection is $242, according to Experian.

That brings total monthly costs for a new-car owner to roughly $1,215 a month.

There are also annual costs to consider, including about $900 a year for maintenance and repairs on average and roughly $75 for registration fees. The car payment is only part of the bill.

It Takes 37 Weeks of Income to Buy

In October 2024, it took 37. 2 weeks of median income to purchase the average new vehicle.

That’s improved slightly from the worst points of 2022 and 2023, but it’s still brutal by historical standards. You need about 7 months of median income to buy a car today, the same as in 2020.

While real prices dropped from 2021’s peak, inflation eroded purchasing power for everything else. The affordable car isn’t coming back anytime soon.

If you need new wheels, the choice is simple: stretch your budget, buy used, or keep driving what you have until the wheels fall off.

This article was created with AI assistance and human editing.

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