U.S. car buyers are 'outlasting their loans' amid affordability crisis

Although new cars get most of the advertising space, the reality is that fewer and fewer Americans are walking onto dealer lots and driving off with a brand-new vehicle. More than 75% of U.S. car owners now drive a secondhand car, according to vehicle history database Bumper.

So far in 2026, 76% of respondents to Bumper’s survey say they’ve purchased their cars used, and who can blame them?

U.S. 2025 new-vehicle salesGM: 2.83 million vehicles (+5.1% year over year); 17.3% market shareToyota: 2.52 million vehicles (+8.4% YoY); 15.5% market shareFord: 2.18 million vehicles (+5.6% YoY); 13.4% market shareHyundai: 1.84 million vehicles (+7.9% YoY); 11.3% market shareHonda: 1.42 million vehicles (+0.6% YoY); 8.8% market share
Source: Cox Automotive

The average manufacturer suggested retail price for a new car was 2.1% higher at $51,288 in January, marking the tenth consecutive month that new-car average MSRPs topped $50,000, suggesting that prices this high are here to stay.

Driven by the threat of higher prices from automotive tariffs, retail consumers spent $620 billion on new vehicles in 2025, according to Automotive World, citing J.D. Power data, a nearly 6% increase from the previous year.

However, after six straight months of strong results in the first half of the year, new-car sales showed weakness in the third quarter and continued to decline in the fourth, according to Cox Automotive sales data, suggesting that higher prices and lower incentives took a toll.

Despite the slowdown, dealers sold 16.3 million new vehicles last year, a 1.8% year-over-year improvement that marked the best year since 2019.

And still, the majority of car sales were used.

“The numbers reflect something most buyers already feel. Incomes have stayed relatively flat while purchasing power has eroded, and few people have the financial cushion — or the credit score — to stomach a five-figure loan at double-digit interest rates just to get something that smells new,” according to Bumper.

New-car sales showed weakness in the third quarter and continued to decline in the fourth.

Photo by andresr on Getty Images

Most cars are already paid off as Americans put off buying new

If you are one of the Americans buying new, chances are you needed financing to make the purchase, given the exorbitant costs: The average transaction price for a new car so far in 2026 is $49,191, according to Bumper.

But even for used cars, whose average price so far this year is $25,287, buying outright is out of reach for most Americans.

Related: Cheap car insurance rates offer another insight into the SUV takeover

The average monthly payment was $510 according to their survey, with most loan terms being either 60 or 72 months. With such a significant financial commitment, it may be surprising that 83% of vehicle owners say that their car is completely paid off.

“That’s not because people got rich. It’s because they bought used, paid cash, and held onto their cars longer than the industry would like,” according to Bumper. “There are a few reasons this is happening. Economic uncertainty has made people genuinely reluctant to take on new debt — not just cautious, but resistant to it in a way that feels different from previous generations.”

Additionally, cars are built better now than they were in the past, so a 10-year-old vehicle with 120,000 miles isn’t automatically a liability as it might have been 10 years ago, Bumper says.

Previous generations taught you that you should trade in your vehicle every five years, but that folk wisdom is outdated in modern life as the average age for a vehicle on U.S. roads was nearly 13 years, according to S&P Global Mobility.

“It makes financial sense when you look at it plainly. Depreciation slows significantly after year ten, so every additional year you hold onto a paid-off car is money you’re not losing,” Bumper said.

“And without a monthly payment eating into your budget, there’s actually room to take care of the car — new brakes, fresh tires, timing belt — the kind of maintenance that keeps an older vehicle honest. The cars themselves are holding up better, too.

Younger Millennials see the biggest increase in monthly car payments

Consumers paid an average transaction price of $49,191 per vehicle in January, a nearly 2% increase from a year ago, according to Kelley Blue Book, but according to new research from Bank of America, the price increases weren’t distributed evenly.

Carmakers sold 15.9 million vehicles last year, down from 16.8 million the year prior, Cox Automotive sales data show. Bank of America says the decline was driven by high prices.

“Auto sales have been tapping the brakes over the last few years, and in our view, affordability pressures are a key reason why,” the bank said in a recent note.

Related: $50,000 average new car prices are here to stay

But customer data also indicate that younger Millennials (ages 30-36) have seen their bills rise more than those of other age groups. Younger Millennials’ monthly car payments have risen by nearly 60% since 2019. Older Millennials and Gen Z have also seen big increases, but they’re just above 40%.

“Why is affordability weighing so heavily on consumers now? Throughout the 2020s, car prices and motor vehicle insurance have climbed significantly. At the same time, Federal Reserve rate hikes have made car loans more expensive,” Bank of America said.

“Taken together, these three factors have raised the overall cost of purchasing and owning a car, which has likely impacted younger generations the most — as they may be building families and scaling up their vehicles.”

U.S. car buyers are spending too much on driving

Most financial experts recommend spending no more than 15% of your monthly income on a vehicle.

In addition to capping your car payments at about 15% of your monthly take-home pay, financial experts also recommend that shoppers aim for a 20% down payment, a 36- to 48-month loan term, and expenses (including insurance) at between 8% and 10% of your gross monthly income.

According to a MarketWatch Guides survey, about 10% of drivers say they spend 30% of their monthly income on driving, while another 12% said they “found themselves living paycheck to paycheck due to the financial strain of their cars.”

Nearly half of U.S. drivers cite car expenses as the reason they can’t save any money, and the average American spends about 20% of their monthly income on auto loans, fuel, insurance, and maintenance. 

A Bank of America survey from this past summer found that among households with a monthly car payment, 20% have a payment of more than $1,000.

Related: 5 hot new cars to avoid at all costs, and 5 alternatives to consider

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