New car payments just hit a record high. Here's what you should be spending.

Core Insights - The average monthly payment for a new vehicle has increased significantly from $491 in 2015 to $772 in the fourth quarter of 2025, with the average amount financed rising from $28,769 to $43,759 [1] Vehicle Affordability - Longer loan terms and higher monthly payments, with buyers now paying $1,000 or more per month, indicate that purchasing a new car may be reaching the limits of affordability [2] - Recommended vehicle budget guidelines suggest spending no more than 8% of monthly income on vehicle expenses, which includes loan payments, fuel, and insurance [3] Strategies for Reducing Monthly Payments - A larger down payment of at least 15% is recommended to save on interest and lower monthly payments [4] - Exploring financing options outside of dealership offers, such as credit unions or banks, can lead to better rates [4] - Manufacturer incentives, including low-rate financing and cash-back offers, can enhance affordability [4] Total Cost Considerations - Buyers should focus on the total cost of the vehicle rather than just the monthly payment, as overpaying can lead to long-term financial losses [5][6] - The depreciation of vehicles can result in being "underwater" on loans, complicating future trade-ins [6] Rising Insurance Costs - Average annual insurance costs have increased by 60% from the first half of 2020 to the same period in 2025, driven by inflation and other factors such as advanced vehicle technology and natural disasters [6][7] - Consumers are advised to review their insurance policies for unnecessary coverage and potential discounts [8] Market Trends - New-vehicle prices are beginning to stabilize, and lower interest rates may provide some relief for buyers in 2026 [9] - An increase in off-lease returns is expected to offer more affordable options in the used vehicle market [9]