Over the past several years, American households have been crushed under the growing burden of debt; in few areas is this more evident than in the realm of auto financing, where families have been struggling with rising car prices, rising interest rates, longer loan terms, and increasingly expensive maintenance and insurance costs.1 Borrowers are facing rising costs imposed at every phase of transaction, from inflated automaker prices, to shady dealer terms, to costlier loan products. Moreover, President Trump’s aggressive tariffs and chaos have caused inflated interest rates, driving prices even higher. Now, President Trump’s war with Iran has sent gas prices surging, with the price of crude oil peaking at $112 per barrel in early April, translating to an average price of $4.54 per gallon at the pump for Americans, at the time of publication.

All of these trends together have made purchasing and maintaining a car increasingly expensive; as a result, households have been taking on more and more debt to finance what is for many a basic necessity. New analysis by The Century Foundation and Protect Borrowers reveals how this historically high auto debt is negatively impacting household budgets, building on a worsening affordability crisis.2

Key Findings

  • Auto debt has exploded, both in absolute terms and as a share of household debt. In recent years, aggregate total auto debt has reached $1.68 trillion, a 37 percent jump since early 2018, and now comprises the largest volume of outstanding loan debt ever recorded. At the end of 2025, nearly 86 million Americans—roughly 28 percent of consumers—have outstanding auto loan or lease debt. Residents in states where driving is most necessary, such as Texas, Alaska, Louisiana, and Florida, are struggling with the highest levels of auto debt.
  • Auto debt appears to accelerate household financial strain. Borrowers carrying auto loans see significantly higher and faster credit card balance growth—regardless of income level—suggesting that auto debt cascades into broader financial pressure. Between early 2018 and late 2025, credit card balances for middle-income borrowers with auto debt surged by 31 percent, while those without auto loans saw a notably lower growth of 17 percent. Borrowers with extended-length auto loans are carrying monthly balances on their credit cards that are 190 percent of (that is, nearly twice) their monthly income.
  • New auto loans are staggeringly more expensive than ever before. At the end of 2025, the average origination balance for an auto loan reached $33,519, an amount $10,000 higher than the average in 2018, due to massive increases in the price of even the most basic cars and a shortage of “affordable” car models. Borrowers are also facing higher interest rates. Today, the average annual percentage rate (APR) for auto loans is nearly 10 percent, up from 7.5 percent in 2018.
  • Financially vulnerable borrowers have the highest costs. The lowest-income borrowers (those in the bottom 20 percent of the income distribution) had the highest average auto loan balance, $4,000 higher than for higher-income borrowers (those in the top quintile). Borrowers with the most limited access to credit pay a steep penalty; for these borrowers, the average APR is up to 18.7 percent, which means a six-year loan on a $30,000 car will cost $20,000 in interest alone. Furthermore, Black, Hispanic, and American Indian and Alaska Native borrowers face higher interest rates than their white and Asian counterparts.
  • Families are turning to risky loans with longer terms to drive down monthly auto costs. As automakers and dealers raise prices, and interest rates remain high, lenders are touting extended-length auto loans (seven years or longer) to new buyers, which translate into higher costs over the life of the loan. However, for these borrowers, even after taking on these riskier products with additional lifetime costs, auto loan payments are still nearly 20 percent of their monthly income, meaning nearly $1 out of every $5 they earn will go toward car payments over the seven years of their loan.

The Current State of Auto Loan Debt in America

Americans have been incurring more and more auto loan debt for years—a trend that has only been exacerbated by the Trump administration. Car prices—which surged during the pandemic as supply chain shocks caused shortages of semiconductors and other auto parts—remain high, as automakers and dealers realized they could turn record profits by keeping prices high and supply constricted.3 Years after the pandemic supply chain shocks eased, car prices continue to rise, outpacing overall inflation. The result is increasingly expensive new and used cars alike, with the average selling price of a new car reaching $47,000 and consumers struggling to find affordable cars.4

At the same time, the cost of financing a car purchase has also skyrocketed. Lenders significantly hiked interest rates, making car loans more expensive as well. In order to afford these costs, many consumers are turning to loans with extended terms, including seven-year loans.5 These loans, while enabling a lower monthly payment, increase the lifetime cost of the loan, boosting lender profits.

Consumers are also facing an auto market plagued by longstanding opaque and even illegal practices by dealers and lenders that inflate and obscure the actual price consumers pay for their cars. Indeed, recent enforcement actions by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have uncovered dealers and lenders engaging in interest kickback schemes; discriminating against Black, Hispanic, or Native American borrowers by charging higher interest rates and fees; engaging in aggressive and wrongful repossession practices; and tacking on hidden junk fees in the form of expensive unwanted add-on products.6

With all the challenges facing car buyers, the Trump administration has only made things worse, by mismanaging the economy such that interest rates remain stubbornly high; by imposing steep tariffs on automobiles and parts that have further driven up prices;7 and by disabling federal oversight by the CFPB and FTC,8 the agencies tasked with going after unscrupulous dealers and lenders when they engaged in illegal practices.

New analysis by The Century Foundation and Protect Borrowers shows that the total aggregate auto debt—including both loans and leases—held by U.S. consumers has soared to unprecedented heights, reaching $1.68 trillion dollars. This makes for a 37-percent jump since early 2018, outpacing overall inflation during that period (see Figure 1).

FIGURE 1


Concurrently, the average balance for all auto loans specifically now exceeds $25,000, a 31 percent increase from 2018 (see Figure 2). As a result, auto debt now makes up 36 percent of all consumer debt in the United States. At the end of 2025, nearly 86 million Americans—roughly 28 percent of consumers—have outstanding auto loan or lease debt.9

FIGURE 2


Much of the increase in total auto loan debt is driven by the jump in size of new auto loans: at the end of 2025 the average origination balance for new loans was $33,519, up almost $10,000 from 2018 (see Figure 3). With auto loan debts this large, at higher interest rates, consumers who have financed a new car are having to spend a growing share of their income paying off their loan. The average monthly payment for auto loans reached $680 in 2025, a 38-percent increase from 2018. Moreover, the lowest-income borrowers (those in the bottom income quintile) have a higher average monthly car payment of $738. This means that, over the course of a year, low-income borrowers are paying $696 more than their higher-income counterparts on their car, the equivalent of paying one additional monthly payment.

FIGURE 3


Another driver of surging auto loan debt is higher interest rates, which increase the overall cost of a loan and eat into a family’s ability to pay down their debt on a monthly basis. Today, the average annual percentage rate (APR) for auto loans is nearly 10 percent, up from 7.5 percent in 2018 (see Figure 4).

FIGURE 4


With auto loan debt reaching record highs, it now comprises the largest portion of non-mortgage consumer debt ever recorded. Auto debt as a share of consumer debt has increased by 3.9 percent since 2018.10

With auto loan debt reaching record highs, it now comprises the largest portion of non-mortgage consumer debt ever recorded.

Auto loans are getting more expensive and comprising a bigger share of consumer debt not only because cars are more expensive and interest rates are higher, but also because borrowers—contending with an affordability crisis impacting every aspect of their lives—are having to rely on longer-term loans to fit monthly loan payments into their budgets. But while longer-term loans may reduce a family’s monthly payment, they also make the total cost of buying a car even more expensive.

The strategy of using longer terms to afford a monthly car payment is becoming more and more common. The share of new auto loans with terms of eighty-four months (seven years) or more reached 14.7 percent by the end of 2025 (see Figure 5). Compared to early 2018, the prevalence of seven-year loans has approximately doubled. Part of why these extended-loan terms are so pernicious is because they are often the only way borrowers can afford their monthly payment relative to their monthly take-home pay. But lengthening a loan greatly increases the total cost: compared to a four-year loan, a seven-year term on the average origination balance of $33,519 with an APR of 9.9 percent adds $5,868 in interest costs over the life of the loan.

Even for families who take on these riskier, longer-term auto loans, the monthly payments can remain unaffordable. For borrowers with extended loan terms of seven years or longer, auto loans payments are now 18.6 percent of their monthly income, meaning nearly $1 out of every $5 they earn will go toward car payments over the seven years of their loan. These increasingly expensive and long auto loans also create distress across borrowers’ financial lives, leading auto loan borrowers to have higher levels of credit card debt.

FIGURE 5


These toplines show widespread distress: growing debt caused by higher prices and interest rates, with consumers turning to loan terms nearly half the lifespan of the average new car,11 which increases the risk of owing more for one’s car than it’s worth. This problem of “negative equity,” where a car buyer ends up “upside down” on their loan, pushes vulnerable car buyers into a cycle of increasingly expensive debt over many years.12 A CFPB study of auto loan performance between 2018 and 2023 found that financed negative equity leads to significantly higher monthly payments in subsequent purchases and increased rates of repossession.13

While the burden of auto loan debt is heavy nationwide, recent data show that residents in some states rely on financing much larger amounts for their vehicle purchases, with more than a $10,000 difference in average loan origination balance between the highest-financing states and the lowest ones. Critically, it is in some of the states where driving is most necessary—such as Texas, Alaska, Louisiana, and Florida—where auto loan debt is highest (see Figure 6).

FIGURE 6

Financially Vulnerable Households Are Struggling the Most

For many people across the country, having a car is non-negotiable, as it provides a way to get to work, pick up kids from school, get groceries, and more. Ninety-one percent of Americans live in a household with one or more cars,14 and 78 percent of workers drive to work either alone or by carpooling.15 As cars get more expensive, and auto debt rises, people have to spend more and more on their cars. In an era characterized by high cost of living and stagnating wage growth, this means household budgets are facing pressure from all directions. This rising debt has cascading effects on low-income families’ entire budgets, causing them to turn to more debt for other necessities. For individuals with auto debt, one indicator of this financial pressure is that their credit card debt has risen faster than individuals without auto debt (see Figure 7).

FIGURE 7


Altogether, this culminates with multiple financial pressures hitting vulnerable households hardest.16 Higher interest rates or longer loan terms and smaller down payments means that paradoxically it is low-income borrowers, with the least disposable income, that carry the most auto loan debt.17 Low-income borrowers had auto loan debt balances that were nearly $4,000 higher on average than borrowers in the top income quintile (see Figure 8).

FIGURE 8


Part of the reason why some borrowers in particular are under so much debt stress is because interest rates for their auto loans can be incredibly high. While the average APR for borrowers with high credit scores is 6.3 percent, for borrowers with low credit scores it can be as high as 18.7 percent (see Figure 9). This vast gap creates a steep credit penalty. For a $30,000 loan over six years, a deep subprime borrower pays over $20,000 in interest alone—three times more than a typical super-prime borrower would pay (about $6,000). The $14,000 in extra interest could cover the cost of child care for an entire year, pay for six months of the average mortgage, or cover the annual cost of groceries for the average family of four.18

FIGURE 9


That means that, regardless of the price of the car, more financially distressed borrowers will pay thousands more over the life of the loan than prime borrowers. These elevated interest rates have persisted for the past several years.

But all borrowers are experiencing greater difficulty affording their monthly costs, as evidenced by data showing that a growing share of borrowers with higher credit scores are turning to auto loans that exceed seven years. Moreover, while borrowers in all credit tiers are increasingly obtaining auto loans with extended terms, it is borrowers with higher credit scores that have the biggest increase in seven-year terms (see Figure 10).19 This suggests that even higher-income borrowers are turning to longer terms to afford cars that have higher prices and that auto loan distress is not limited to lower-income borrowers at the lower end of the credit spectrum.

FIGURE 10


Increased auto costs eat into everyone’s household budgets, leaving less money for basic needs. Rising gas and insurance prices and maintenance costs means the total cost of owning a car is 40 percent higher than it was in the beginning of 2020.20

These growing auto costs—alongside broader cost of living increases that have driven an affordability crisis—mean that borrowers with auto loan debt are increasingly relying on other forms of debt, such as credit card debt, to pay for other basic needs. On average, auto loan borrowers have a credit card balance that exceeds their monthly income, and this problem is particularly acute for borrowers with extended-term loans, who carry credit card balances that are 190 percent of (that is, nearly twice) their monthly income—46 percentage points higher than borrowers with loan terms of six years or less (see Figure 11). Borrowers whose balances are that much higher than their income are unlikely to be able to pay it off each month, and therefore are on an escalator to more and more debt.

FIGURE 11


Regardless of loan term or income level, having an auto loan corresponds with faster credit card balance growth than those without an auto loan. Among middle-income individuals, credit card balances grew by 31 percent for borrowers with auto debt compared to 17 percent for those without an auto loan (see Figure 12).

FIGURE 12


While auto loan debt is a widespread concern, it affects certain communities more deeply than others. Borrowers in rural communities in particular, where cars are vital, are carrying higher levels of auto loan debt than borrowers in non-rural communities (see Figure 13).21

FIGURE 13


Yet, it is low-income borrowers who bear the greatest financial distress. Borrowers in the bottom 20 percent of the income distribution had an average auto loan balance of $28,832—nearly $4,000 more than higher-income borrowers. It is not necessarily that these borrowers are buying more expensive cars than high-income borrowers. Rather, higher interest rates and a lower capacity to afford a down payment leads to borrowers needing to take out larger loans. In turn, these borrowers are forced to spend an even greater share of their take-home pay just on their car payments, leaving them more likely to begin carrying higher credit card balances to cover basic needs. And this credit card debt is also costly.22 The ultimate result of these converging pressures is that households are forced to funnel more and more of their already limited take-home income to simply paying off debt and the high cost of financing basic necessities.

Additionally, racial disparities and discrimination23 raise the costs of auto loans for communities of color who, due to persistent racial wealth gaps24 and pay gaps,25 typically have lower incomes and wealth in the first place. As of 2025, Black, Hispanic, and American Indian and Alaska Native borrowers are given higher interest rates on auto loans than White and Asian borrowers (see Figure 14).

FIGURE 14

Conclusion

For millions of working families, a car is not a luxury: it is an essential lifeline to get to and from work, to pick up children from school or child care, and access health care and other critical services. Unfortunately, for too many Americans, the cost of buying and maintaining even the most basic car has now come with an inexcusably hefty price tag and unprecedented levels of debt.

The findings in this report shed light on how historically high levels of auto loan debt are fueling the flames of a larger household debt crisis and putting even more strain on household budgets. Historically high auto costs and interest rates are pushing record numbers of borrowers into longer term loans that raise the total costs of owning a car and keep households in debt—and in financial precarity—longer. The worst of these costs are borne by the most vulnerable borrowers. And to manage the strain, these households are increasingly turning to credit card debt to cover their basic necessities.

Instead of providing relief, the Trump administration’s chaotic economic agenda, aggressive tariffs, and expensive fallout from the war with Iran will only make matters worse. Amidst the growing affordability crisis, Americans deserve urgent action to bring down costs and rein in profiteering from the dealers and lenders who have been allowed to get away with nickel-and-diming working families for far too long.

Appendix: Data and Methodology

This analysis utilizes individual-level longitudinal data from the University of California Consumer Credit Panel (UC-CCP), a 2 percent nationally representative random sample of U.S. adults with credit records. The study period covers Q1 2018 through Q4 2025. All aggregate national figures are scaled to reflect the total U.S. adult population with a credit file.

Unit of Analysis and Product Definitions

  • Borrower-Level Aggregation: All averages are calculated at the consumer level. If an individual is the primary borrower on multiple auto tradelines, those balances are aggregated to reflect the total auto debt burden per person.
  • Auto Debt vs. Auto Loans:
    • Auto Debt (inclusive): Figure 1 utilizes a broad definition of auto debt that includes both traditional installment loans and leases.
    • Auto Loans (Exclusive): All other figures and analyses—including interest rates (APR), loan terms, and debt-to-income (DTI) calculations—refer strictly to traditional installment auto loans, excluding leases to ensure product-specific accuracy.

Income Imputation

To assess financial distress, we derived a localized quarterly proxy for individual income. Because the UC-CCP does not contain self-reported income, we utilize an “income per adult” metric mapped to the borrower’s geography (county of residence). Base values are derived from the U.S. Census Bureau American Community Survey (ACS) 5-year estimates.26 We define annual income per adult as:

To account for localized economic trends, annual anchors for counties are derived from the BEA Annual County Personal Income (Table CAINC1).27 Annual anchors are converted to quarterly values using state-level BEA Quarterly Personal Income (Table SQINC1).28 This process generates a “scaler” that captures intra-year economic volatility. As ACS data for 2025 is currently unavailable, income for this period was imputed by projecting the 2024 annual county personal income values forward with a 3 percent year-over-year growth cap. 2025 state-level quarterly growth rates were applied to these projected anchors, with a 0.8 percent quarter-over-quarter cap implemented for Q4 2025.

Notes

  1. Kailyn Rhone, “‘It’s Just Crazy’: High Car Payments Make Ownership Feel Impossible,” New York Times, March 16, 2026, https://www.nytimes.com/2026/03/16/business/car-ownership-prices-interest-rates.html?smid=nytcore-ios-share.
  2. This analysis uses data from the University of California Consumer Credit Panel (UC-CCP), a 2 percent nationally representative sample of U.S. adults with credit records. We thank the California Policy Lab for hosting and documenting the UC-CCP.
  3. Erin Witte and Tara Mikkilineni, “Driven to Default: The Economy-Wide Risks of Rising Auto Loan Delinquencies,” Consumer Federation of America, September 9, 2025, https://consumerfed.org/wp-content/uploads/2025/09/Driven-to-Default-9.9.25-final.pdf.
  4. Clifford Winston, “Where Did All the Affordable Cars Go?” New York Times, April 13, 2026, https://www.nytimes.com/interactive/2026/04/13/opinion/affordable-car-cost.html.
  5. Sarah Agostino, “Share of 7-year car loans grows as buyers ‘work harder to make the numbers fit,’ expert says,” CNBC, April 14, 2026, https://www.cnbc.com/amp/2026/04/14/car-loan-terms.html.
  6. Erin Witte and Tara Mikkilineni, “Driven to Default: The Economy-Wide Risks of Rising Auto Loan Delinquencies,” Consumer Federation of America, September 9, 2025, https://consumerfed.org/wp-content/uploads/2025/09/Driven-to-Default-9.9.25-final.pdf.
  7. “The Latest Car Tariff Information,” Kelley Blue Book, accessed April 14, 2026, https://www.kbb.com/tariffs/.
  8. Erin Witte and Tara Mikkilineni, “Driven to Default: The Economy-Wide Risks of Rising Auto Loan Delinquencies,” Consumer Federation of America, September 9, 2025, https://consumerfed.org/wp-content/uploads/2025/09/Driven-to-Default-9.9.25-final.pdf.
  9. Unless otherwise noted, data in this report are the authors’ analyses of data from the University of California Consumer Credit Panel (UC-CCP).
  10. “Household Debt and Credit Report (Q4 2025),” Center for Microeconomic Data, Federal Reserve Bank of New York, accessed April 14, 2026, https://www.newyorkfed.org/microeconomics/hhdc.
  11. Todd Bialaszewski, “What is the lifespan of a vehicle in the USA?” Auto Recycling Word, July 22, 2024, https://autorecyclingworld.com/what-is-the-lifespan-of-a-vehicle-in-the-usa/.
  12. Erin Witte and Tara Mikkilineni, “Driven to Default: The Economy-Wide Risks of Rising Auto Loan Delinquencies,” Consumer Federation of America, September 9, 2025, https://consumerfed.org/wp-content/uploads/2025/09/Driven-to-Default-9.9.25-final.pdf; Ryan Felton, “America’s Pandemic Car Bubble is Now Trapping Buyers in Debt,” Wall Street Journal, April 25, 2026, https://www.wsj.com/business/autos/car-owners-debt-negative-equity-3cfcd031?mod=hp_lead_pos9.
  13. “Negative Equity in Auto Lending,” Consumer Financial Protection Bureau, June, 2024, https://files.consumerfinance.gov/f/documents/cfpb_negative-equity-in-auto-lending-report_2024-06.pdf.
  14. “American Community Survey, DP04: Selected Housing Characteristics,” 2024 ACS one-year estimates data profiles, U.S. Census Bureau, accessed April 14, 2026, https://data.census.gov/table/ACSDP1Y2024.DP04?q=car+ownership.
  15. “American Community Survey, S0801: Commuting Characteristics by Sex,” 2024 ACS one-year estimates subject tables, U.S. Census Bureau, accessed April 14, 2026, https://data.census.gov/table/ACSST1Y2024.S0801?q=Commuting.
  16. Throughout this brief, income refers to a localized quarterly proxy of per capita income for adults (ages 18+), derived from a combination of American Community Survey (ACS) and Bureau of Economic Analysis (BEA) data. See Appendix for more detail.
  17. Ana Hernández Kent and William M. Rodgers III, “That Extra Money: A Primer on Discretionary Income,” Federal Reserve Bank of St. Louis, August 6, 2025, https://www.stlouisfed.org/open-vault/2025/aug/primer-discretionary-income.
  18. Monthly family grocery costs calculated using moderate-cost plan for family of four with two children using USDA food plan data, available at https://www.fns.usda.gov/research/cnpp/usda-food-plans/cost-food-monthly-reports. Child care costs are the average price of child care from Child Care Aware of America, available at https://www.childcareaware.org/price-landscape24/. Average mortgage rates are taken from Bankrate, available at https://www.bankrate.com/mortgages/average-monthly-mortgage-payment/#what-is.
  19. The lower incidence of extended-term auto loans for deep subprime borrowers is likely due to lender-imposed term limits on high-risk profiles.
  20. Kailyn Rhone, “‘It’s Just Crazy’: High Car Payments Make Ownership Feel Impossible,” New York Times, March 16, 2026, https://www.nytimes.com/2026/03/16/business/car-ownership-prices-interest-rates.html?smid=nytcore-ios-share.
  21. Borrowers are designated as “Rural” if they reside in counties with a 2023 USDA Rural-Urban Continuum Code (RUCC) of 8 or 9 (counties with urban populations of fewer than 5,000). All other borrowers (RUCC 1–7) are classified as non-rural. U.S. Department of Agriculture (USDA), Economic Research Service, “Rural-Urban Continuum Codes,” 2023, https://www.ers.usda.gov/data-products/rural-urban-continuum-codes.aspx. Borrowers are designated as “Rural” if they reside in counties with a 2023 USDA Rural-Urban Continuum Code (RUCC) of 8 or 9 (counties with urban populations of fewer than 5,000). All other borrowers (RUCC 1–7) are classified as non-rural. U.S. Department of Agriculture (USDA), Economic Research Service, “Rural-Urban Continuum Codes,” 2023, https://www.ers.usda.gov/data-products/rural-urban-continuum-codes.aspx.
  22. Jennifer Zhang, Eduard Nilaj, Mike Pierce, and Julie Margetta Morgan, “Interest Nation: The State of America’s Credit Card Debt Crisis,” The Century Foundation, March 17, 2026, https://tcf.org/content/report/interest-nation-the-state-of-americas-credit-card-debt-crisis/.
  23. Jonathan Lanning, “Evidence of Racial Discrimination in the $1.4 Trillion Auto Loan Market,” ProfitWise News and Views 1, Federal Reserve Bank of Chicago, January, 2023, https://www.chicagofed.org/publications/profitwise-news-and-views/2023/discrimination-auto-loan-market.
  24. Briana Sullivan, Donald Hays, and Neil Bennett, “Households With a White, Non-Hispanic Householder Were Ten Times Wealthier Than Those With a Black Householder in 2021,” U.S. Census Bureau, April 23, 2024, https://www.census.gov/library/stories/2024/04/wealth-by-race.html.
  25. Valerie Wilson and William Darity Jr., “Understanding black-white disparities in labor market outcomes requires models that account for persistent discrimination and unequal bargaining power,” Economic Policy Institute, March 25, 2022, https://www.epi.org/unequalpower/publications/understanding-black-white-disparities-in-labor-market-outcomes/.
  26. “Table B19313: Aggregate Income In The Past 12 Months,” “Table B01003: Total Population,” and “Table B09001: Population Under 18 Years,” U.S. Census Bureau, American Community Survey (ACS) 5-year estimates, 2015–2019 and 2020–2024, https://data.census.gov/.
  27. “Table CAINC1: Annual Personal Income by County,” 2015–2025, U.S. Bureau of Economic Analysis, https://www.bea.gov/data/income-saving/personal-income-by-county.
  28. “Table SQINC1: Quarterly Personal Income by State,” 2010–2025, U.S. Bureau of Economic Analysis, https://www.bea.gov/data/income-saving/personal-income-by-state.

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