The average monthly car loan payment in the U.S. is $716 for new vehicles and $526 for used ones originated in the fourth quarter of 2022, according to credit reporting agency Experian.
It’s worth noting that more recent reports from other industry analysts place the average monthly car payment for new vehicles even higher. According to Cox Automotive, the estimated typical monthly new car payment was $754 in March 2023.
When you’re buying a car, it’s helpful to use the average car payment amount as a benchmark, but your actual car payment is determined by several different factors.
What determines your monthly car payment?
Here’s a look at what contributes to the total amount of a car loan payment. Some of these factors are within a borrower’s control more than others.
Loan amount. The amount you borrow is based on the sale price of the car you choose, minus any down payment or trade-in credit. This is the principal portion of a monthly car payment.
Interest rate. Interest is the percentage you pay on top of the principal to borrow money. Lenders consider factors like your credit score, debt and income to set your interest rate, which will vary by lender. When comparing lender rates, use the annual percentage rate, or APR, because it includes any lender fees.
Type of car you buy and where. Your choice of vehicle can also influence the interest rate you receive. For example, some lenders charge higher loan rates for used cars. If you purchase a car from a private seller, your rate may be even higher.
Length of the loan. Called the loan term, this is the number of months you have to pay off the loan.
To put it simply, your monthly auto loan payment is calculated at the beginning of your loan by dividing the total loan amount, including interest, by the number of months in the loan term.
Recent averages for factors that affect a car payment
While each car buyer’s situation is different, the following numbers offer insight into the car-financing market in the fourth quarter of 2022.
Source: Experian Information Solutions based on VantageScore credit scoring.
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How credit scores affect monthly car payments
Your credit score plays a significant role in what your car payment will be, because it’s one of the biggest factors in determining your loan’s interest rate. The lower your credit score, the higher your interest rate will be. The more interest that’s included in your loan amount, the higher your monthly car payment will be.
If you get your free credit score, you can see what credit tier you fall into and the average monthly new and used car payment for borrowers in that tier. NerdWallet also provides the average car loan interest rate for your credit score.
Average monthly car payment by credit score
Average monthly payment, new car
Average monthly payment, used car
Source: Experian Information Solutions.
How loan term affects your monthly car payment
Many car buyers choose a longer loan term to lower their monthly car payment. That’s why the average car loan length is now nearly 70 months for both new and used cars. (NerdWallet recommends loan terms no longer than 60 months for new cars and 36 months for used cars.)
Stretching out the loan term to lower your car payment isn’t always a good idea because cars tend to lose value over time. The current car market is a unique one where depreciation is mostly nonexistent, but in a normal market, cars lose around 20% to 30% of value in the first year. If you’re still paying on your car in year five or six, you could reach a point of being upside-down on your car loan, which means you owe more on the car than you could get when selling it.
Also, a longer loan term can cost you more money overall. For example, compare a $20,000 used car loan with an interest rate of 9% for terms of 36 and 60 months. With the 60-month loan, the borrower would pay an extra $2,000 in interest over the life of the loan.
Estimating your monthly car payment
Average car loan figures give you an idea of what to expect in the current car market, but your personal numbers will most likely be different. Your actual car payment could be much higher, or much lower, than the average car payment per month reported by car and credit companies.
A good way to estimate what your car payment will be is to use our auto loan calculator. Input your own values for car price, trade-in amount, down payment, interest rate, credit score and loan term to see your estimated monthly car payment. You can input different numbers to arrive at a loan payment that fits your budget. NerdWallet recommends not spending more than 10% of your take-home pay on a car loan payment.
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