4 Hidden Ways Cars Are Driving Americans Into Poverty, According To Humphrey Yang
Written by
Angela Mae
Edited by
Levi Leidy
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According to the latest U.S. Census data, 92% of Americans own at least one car. Unless you live in a city with excellent public transportation, having a car might seem mandatory. But that doesn’t mean you should be spending a huge chunk of your income on your vehicle.
Unfortunately, as personal finance influencer Humphrey Yang pointed out in a recent YouTube video, many Americans are struggling financially because of their car payment and related expenses. Here’s why and what you can do about it.
Car Loans Are Less Regulated
Compared to other loans, like mortgages, auto loans aren’t nearly as regulated. When you apply for a mortgage, your lender will generally check your income, assets, debts, credit and a host of other factors. They may require pay stubs, bank statements, federal tax returns and investment account statements. Most lenders won’t approve your loan if the mortgage payment is above 36% (45% in some cases) of your gross monthly income.
But with auto loans, the requirements are much less stringent. Your lender may check things like your income and credit. But they won’t normally request additional documentation proving whether you can afford the car payment — and all related expenses. They might even extend the repayment term if it means getting you the loan rather than rejecting your application.
As Yang pointed out, this can be a major problem. According to Experian, the average new car payment is $745 — and it’s $521 for used cars. Even if you can afford the payment on paper, you may struggle with other expenses, like insurance, maintenance and gas.
Plus, a longer repayment term means paying more overall. Say you get a $25,000 auto loan with a 72-month repayment term and 6% interest rate. Your monthly payment would be around $414 and your total interest paid would be $4,831. Switch to a 48-month term and you’d pay $587 monthly with $3,182 in total interest charges.
People View Their Vehicle as a Status Symbol
Many people see their vehicle as a status symbol, according to Yang. But with status often comes a higher price tag. After all, a 2025 Honda Civic has a starting MSRP of $25,400 while a 2025 BMW M4 starts at around $80,875.
Whether it’s tech or vehicles, it’s easy to feel pressured into buying the latest and greatest. If you’re surrounded by successful people, chances are you want to feel part of the group. But if you’re buying a fancy vehicle because of perceived success or self-worth, you could end up with a payment you can barely afford.
Humphrey Yang’s advice is to try to separate your identity from what you drive. See your vehicle as a tool rather than as a reflection of you.
Affordability Isn’t a Factor
Not everyone knows how to budget for a car. Some choose a make and model they like, and go for it. Others look at their overall income and base their decision on that. But if you want to avoid taking on a loan you can’t afford, you need to run the numbers.
Yang suggested following the “20/4/10” rule of automobile affordability:
- Save for a 20% down payment.
- Get a four-year maximum repayment term.
- Dedicate no more than 10% of your gross monthly income to the car payment.
Say your gross salary is $60,000. Following this rule, your maximum car payment (with insurance and maintenance) would be $500. You can use a simple car loan calculator to determine what you can afford. Be sure to account for other fees like registration and sales tax.
It Comes Down to Location
As with real estate, it’s all about location. Many Americans buy a vehicle simply because they don’t have access to good public transportation. Unless you live somewhere like New York City or Washington, D.C., chances are you need a reliable vehicle.
But reliable doesn’t have to mean expensive. Ask yourself:
- What (and how many vehicles) do I need?
- Can I comfortably afford the payment (plus any associated fees)?
- Will this car payment keep me from achieving other financial goals?
- Am I tying my self-worth to what I drive and, if so, why?
If affordability is an issue, consider buying certified used. You’ll want to check the vehicle’s history for any issues, recalls, mileage or accidents. But you could be saving yourself a lot of financial stress.
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