Navigating the New Era of Automotive Finance: Are High Payments the New Normal?

The Unyielding Rise of Vehicle Payment Commitments

Despite the well-known escalation in vehicle pricing, consumers are increasingly comfortable with substantial monthly payments. Data from Experian's Q2 2025 Automotive Finance Market report indicates a notable increase in loans and leases surpassing the $1,000 monthly threshold for both brand-new and pre-owned vehicles. This trend suggests a growing willingness among buyers to allocate a larger portion of their income towards car ownership, even as financial advisors might caution against such expenditures.

Insights into New Vehicle Financing: Terms, Rates, and Loan Amounts

In Q2 2025, over 15% of new car payments exceeded $1,000, a rise from the previous quarter. While 8.96% of leases were above this amount, an even more significant 17.57% of financed vehicles carried monthly payments of $1,000 or more. Average lease payments also saw a modest increase of approximately $20 per month year-over-year, impacting all credit profiles. For those opting to finance, payment increases were more varied, with subprime and near-prime buyers experiencing the most substantial jumps, ranging from $32 to $7. Overall loan amounts also climbed, particularly for these credit segments. Interestingly, average interest rates for prime customers saw a slight decrease, while loan terms generally extended, with most loans now exceeding 72 months, driven by an increase in loans extending beyond 73 months.

The Evolving Landscape of Used Vehicle Acquisitions

For consumers seeking alternatives to costly new vehicles, the used car market presents its own set of financial complexities. Experian's data reveals that while used car loan rates have marginally declined, the average interest rate remains elevated at 11.54%, with an average financed amount of $26,795. The typical used vehicle loan term stands at 67 months, resulting in an average monthly payment of $529. A significant finding is that 4.35% of all used car loans reported monthly payments of $1,000 or more, illustrating that even in the pre-owned segment, high costs are becoming more common. Furthermore, nearly 70% of used car loans now span longer than 61 months, reflecting a broader trend of extended repayment periods across the automotive finance sector.

The Surging Phenomenon of Loan Refinancing

The notable increase in vehicle costs and loan terms has led to a significant surge in refinancing activities. Experian's report highlights an 11% increase in refinancing volume from Q1 2025 and a remarkable 29% increase compared to five years prior. The $3.6 billion in refinancing recorded in Q2 2025 approaches the levels seen during periods of historically low interest rates in 2021 and 2022. Prime risk category customers account for over half of all refinancing, indicating a strategic move to manage existing debt. While the average refinancing term remains steady at around 65 months, it effectively extends the overall loan duration to over 90 months. Despite these efforts, delinquencies—loans and leases past due—continue to be a concern, rising to 2.32% from 2.28% in Q4 2024.

A Concluding Perspective on the Automotive Finance Climate

The comprehensive data from Experian paints a clear picture: vehicles are becoming increasingly expensive. While consumers with excellent credit profiles largely manage these costs, the rising delinquency rates and extended loan terms suggest that many others are stretching their financial limits to secure transportation. The once daunting $1,000 monthly payment is becoming less of an anomaly, signaling a significant shift in consumer spending habits. Although these high payments still represent a minority, the continuous upward trend raises questions about the long-term sustainability and accessibility of vehicle ownership for a broad segment of the population.