Car Payments Just Reached a New High—Even With Loan Rates at a 3-Year Low

Core Insights - Average car loan rates have decreased by 0.5 percentage points since September, reaching their lowest level since October 2022, but monthly payments continue to rise [2][10] - The average monthly payment for a new car has reached a record high of $781, despite lower loan rates [3][10] Loan Amounts and Payments - The average amount financed for a new car purchase in December 2025 was $44,361, which is over 4% higher than the previous year [5] - Monthly payments for used cars have also increased, with an average payment of $568 in December 2025, up by $14 or 2.5% from the previous year [8][10] Loan Terms and Interest Rates - A growing number of customers are opting for longer loan terms, with nearly 21% of new-car loans having terms of 84 months or longer in Q4 2025, compared to less than 18% a year earlier [6] - The average annual percentage rate (APR) for new-vehicle purchases has only decreased by 0.1% from 6.8% in late 2024 to 6.7% at the end of 2025, indicating limited relief for borrowers [7] Market Dynamics - The increase in car prices and larger loan balances is offsetting any benefits from the decline in loan rates, leading to higher monthly payments [10] - Customers are facing challenges in finding competitive promotional rates, with only 3.1% of new-vehicle loans offering a 0% rate in Q4, down from 3.3% in Q3 [7]