New vehicle monthly payments have reached an all-time high. Find out how much you ought to be allocating.

New Car Payments Reach Record Highs

Back in 2015, the typical monthly payment for a new car was $491, with buyers usually financing around $28,769. Fast forward a decade, and by the end of 2025, the average monthly payment soared to $772, while the average amount financed hit $43,759, according to data from Edmunds.

With longer loan terms, more people than ever paying $1,000 or more each month, and insurance rates climbing, the cost of owning a new car is pushing the boundaries of what many can afford. In some ways, it’s becoming as challenging as buying a home.

Wondering if you’re stretching your budget too far on a new vehicle? Here’s how to evaluate your spending.

How Much Should You Spend on a Car?

Many experts suggest allocating 10% to 15% of your take-home pay to car-related expenses. However, Chase Auto, the auto financing division of Chase Bank, recommends keeping your monthly vehicle costs under 8% of your income for a more conservative approach.

This budget should cover your loan or lease payment, fuel, and insurance.

Tips for Lowering Your Monthly Car Payment

Keith Barry, a senior automotive reporter at Consumer Reports, emphasizes that making a larger down payment is the most effective way to reduce your monthly bill.

“Aim to put down at least 15%,” Barry advises. “This reduces your interest charges and lowers your monthly payment. Also, consider getting financing from a credit union or your own bank instead of relying solely on dealership offers. If you’re stuck with a high interest rate, refinancing could save you a significant amount.”

Barry also points out that manufacturer incentives, like low-interest financing or cash-back deals, can make a big difference. However, he notes these offers are often tied to less popular models, such as sedans or compact hatchbacks. While these vehicles may come with steep discounts, they might also have lower resale values and higher repair costs, which could offset any initial savings.

When shopping, Barry recommends focusing on the total cost of the vehicle rather than just the monthly payment. Salespeople may highlight low monthly payments to distract from the overall price. Overpaying for a car can lead to greater losses as the vehicle depreciates, and you could end up owing more than the car is worth when it’s time to trade in.

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Insurance Costs for Vehicles Are Climbing

Auto insurance is also becoming more expensive. The Bureau of Labor Statistics reports that from early 2020 to mid-2025, average annual insurance premiums jumped by 60%.

According to AAA, this increase isn’t just due to inflation. Modern vehicles are packed with advanced technology, making repairs pricier. Additionally, frequent severe weather events are driving up claims and, in turn, insurance costs.

Other factors contributing to rising premiums include:

• Lenders often require higher coverage for expensive vehicles that are financed or leased.
• Comprehensive claims, which cover non-collision incidents like theft, vandalism, or weather-related damage, are becoming more costly.
• The number of claims in your region or state can also impact your rates.

AAA suggests reviewing your policy to ensure you’re not paying for unnecessary coverage and to check for discounts, such as those for low annual mileage. Raising your deductible, setting up automatic payments, or bundling your auto policy with home insurance can also help reduce your premiums.

Are Car Prices Finally Leveling Off?

Ivan Drury, director of insights at Edmunds, notes that car buyers may see some relief in 2026. While new vehicle prices remain high, they are starting to stabilize. Lower interest rates could benefit both new and used car shoppers, and a surge in off-lease vehicles is expected to make the used market more affordable.