Automotive costs aren’t happening, and neither are rates of interest. To afford a brand new automobile, many consumers are signing up for longer loans to make month-to-month funds really feel extra manageable.
Edmunds’ Q2 2025 report exhibits a number of unsettling new data in auto financing. 22.4% of consumers financing a brand new automobile selected an 84-month or longer mortgage time period, up from 20.4% in Q1 2025 and simply 17.6% a 12 months earlier.
In response to Edmonds, the common quantity financed for new automobiles climbed to $42,388 in Q2 , an all-time excessive, and practically 20% of consumers agreed to month-to-month funds of $1,000 or extra. To decrease upfront prices, consumers are additionally placing much less cash down. The common down cost was $6,433 in Q2, down from $6,579 on the identical time a 12 months in the past.
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Although taking out a seven-year auto mortgage may make month-to-month funds really feel extra doable, it comes with long-term prices. You may pay extra in curiosity general, the automobile will depreciate and there is a greater threat of owing greater than the automobile is price — particularly if you happen to commerce it in early or the automobile loses worth quicker than anticipated.
Should you’re contemplating a long-term mortgage to make funds extra reasonably priced, be certain that the full curiosity price is not one thing you remorse later. You may additionally need to think about automobile repairs, since longer possession normally means paying extra for repairs. And bear in mind, although longer loans could make automobile possession seem extra reasonably priced within the brief time period, they typically increase your true price of possession general.
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Committing to a seven-year mortgage normally means you may be paying extra curiosity over the lifetime of the mortgage and staying upside-down longer. If you would like a decrease month-to-month invoice with out the lengthy mortgage time period, contemplate these options:
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Purchase calmly used: A automobile that is one to 3 years outdated has already taken the largest hit in worth, so the value — and your cost — will usually be decrease.
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Put extra money down: A much bigger down cost reduces the quantity you borrow, which suggests smaller month-to-month funds and fewer curiosity paid over the lifetime of the mortgage.
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Store round for higher charges: Get pre-approved at a credit score union or financial institution and examine at the very least two to 3 presents to get the very best deal. If in case you have a less-than-ideal credit score rating, repair any credit score report errors or use a co-signer to maximise your possibilities of getting a extra reasonably priced price.
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