A $ 700 $ 7 0 0 monthly car payment is considered high, representing roughly the current average for a new vehicle in the U.S. (approx. $ 700 − $ 750 $ 7 0 0 − $ 7 5 0 ) rather than a budget-friendly option. While common, this amount often exceeds recommended financial guidelines, which suggest keeping total car costs (loan, insurance, fuel) under 20% of your take-home pay.
Even with a high income, $700/month is a lot to allocate towards a car. There is an advantage of buying a new car like not having to worry about the maintenance too much and it's still under warranty for a long time.
Car Payments Now Average More Than $750 a Month. Enter the 100-Month Car Loan. The price of new cars and trucks in the U.S. has increased 33% since 2020, and consumers are piling on interest as they stretch out loan terms to eight, nine and nearly 10 years.
🚗 The average car payment in the U.S. is now around $700 to $800 a month. Used car payments often run $500 or more. That does not happen by accident. Long loans, high interest rates, and expensive vehicles push payments higher fast.
A $30,000 car payment varies, but expect roughly $450 to $600 per month for a 5-year loan, depending heavily on your interest rate (e.g., 5% vs. 8%), down payment, and loan term; a shorter term or higher rate means higher monthly costs, while a longer term or better rate lowers them. For instance, at 7% over 60 months, it's around $590-$600, but with a 5.74% rate for 60 months, it's closer to $576, or around $490 for 48 months.
As a general guideline, your car loan payments should be less than 10 to 15 percent of your take-home pay each month.
According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses.
The best times to buy a car are the end of the calendar year (Oct-Dec) for major discounts on outgoing models and meeting quotas, the end of the month/quarter for salespeople to hit targets, and January/February for lingering year-end deals and an influx of used lease returns, especially for EVs. Holiday weekends (Memorial Day, Labor Day, Black Friday) and slower days like rainy weekdays also offer opportunities for better deals.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
If your gross salary is $60,000, your take-home monthly pay is probably around $3750, assuming about 25 percent of your pay goes toward taxes and other expenses. Based on a calculation of spending 10–15 percent of your monthly pay on a car loan, you should spend no more than $562.50 on your monthly car payment.
For a $20,000 car, a good down payment is at least $2,000 (10%) for a used car, but ideally $4,000 (20%), to reduce loan risk and lower monthly payments, though putting down as much as you comfortably can is always best to save on interest.
In today's market of inflated car prices and payments, the average monthly new-car payment has surpassed $700, according to the vehicle affordability index provided by analytics companies Cox Automotive and Moody's Analytics.
Most financial experts recommend spending no more than 10% of your take-home pay on your monthly car payment and no more than 15–20% on total car expenses including gas, insurance, and maintenance.
You might find your car payment is too high for a variety of reasons: Maybe you financed your car at the dealership and now realize you could have qualified for a loan with a lower rate and payment. Perhaps you bought a more expensive car than you could realistically afford.
Beyond the monthly payment, you'll also face years of variable expenses like car insurance, gas, maintenance and taxes, which can spike without warning. By considering these costs before buying a new or used car, you'll be better prepared for the financial ups and downs of hidden car ownership costs.