With new vehicle prices skyrocketing to new record levels over the past few years – a problem that Ford is working to resolve – coupled with rising interest rates that haven’t done a terribly great job of quelling inflation, new car buyers are dishing out more and more money for their loans, too. In fact, as Ford Authority reported earlier this year, nearly 20 percent of new car buyers are shelling out more than $1,000 a month in payments, but on top of that, it seems as if those same buyers are also opting for longer and longer financing terms in an effort to bring those payments down, too.
According to new data from Edmunds, 19.8 percent of new car buyers opted for an 84-month loan in Q1 2025, which is a new record high, as well as a significant jump from 13.4 percent in Q1 2019. Meanwhile, 60-75 month loans accounted for 67.4 percent of all new vehicle financing over the first quarter, down from 68.9 percent in Q1 2024, while 48 month or less terms made up 10.2 percent of loans over the same time period – down from 11.9 percent in Q1 2024.
The average amount financed for new-vehicle purchases in Q1 2025 was $41,473, compared to $42,113 in Q4 2024 and $40,427 in Q1 2024, but $1,000 monthly payments held steady, regardless – coming in at 17.7 percent of all new loans in the first quarter, a bit lower than 18.9 percent in Q4 2024. The average new-vehicle annual percentage rate (APR) in Q1 2025 was 7.1 percent, up from 6.8 percent in Q4 2024, but zero percent financing dealers accounted for just one percent of all new vehicle loans in Q1 2025 – the lowest on record.
“The auto finance market showed signs of steadiness in Q1, but that stability doesn’t mean affordability has improved,” said Jessica Caldwell, Edmunds’ head of insights. “When one in five new-car buyers are taking on seven-year loans, it’s clear how many consumers are still financially stretched. Even with rates holding relatively flat, the continued reliance on extended terms and high monthly payments reveals how challenging car buying remains. And now, with auto tariffs officially taking effect, there’s a risk that they will add fuel to the fire – triggering a disruption that could push vehicles even further out of reach for many shoppers.”
Comments
I prefer the new 120 month loans for my new Ford.
Loan periods over five years is a huge waste of money. It is better and more efective to save the equivalent payment in a high interest account for five years, then buy the vehicle at a cash discount. Taking out a loan for many years is giving money to the bank!
Dr. Bernard Meltzer said many years ago that if you can’t afford to pay off a car in 3 years you can’t afford the car. These words of wisdom haven’t applied for the past 25 years! Be flexible and find a new car with a low interest rate. Too many young people are buying cheap cars with a high interest rate. That cheap car ends up not being cheap.
I would also suggest buying used, though that’s not getting cheaper, either.