$1K Car Payments Are Rising: The Income You Need To Afford One
Written by
David Nadelle
Edited by
Zuri Anderson
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After rising above $50,000 for the first time in September, the average transaction price (ATP) of a new vehicle in the U.S. increased to an all-time high of $50,326 in December, according to 2025 fourth quarter data from Kelley Blue Book (KBB).
Although December had the highest monthly average dealer discount (7.5%), more new car shoppers are taking on $1,000-plus monthly payments than ever, per a new Edmunds report.
And yet, the industry isn’t exactly hurting, which has us asking the questions: Who can afford to buy a new car now, and how much does a household have to make to afford a $1,000 monthly payment?
$1,000 Monthly Car Loan Payments on the Rise
More auto buyers are opting for $1,000 or higher monthly installments than ever before. In Q4 2025, the percentage of new-car buyers who agreed to monthly payments of $1,000 or more reached a new high of 20.3% of all financed new-vehicle purchases, up from 19.1% in Q3 2025 and 18.9% in Q4 2024, according to Edmunds.
A new high was also set for those buying used vehicles, with 6.3% agreeing to $1,000 or more monthly payments during the quarter, up from 6.1% in Q3 2025 and 5.4% in Q4 2024.
Unfortunately, this is the new reality, and one that doesn’t sit well with the experts we asked.
“Monthly auto expenses of $1,000 are unreasonable for any driver,” said Paul Gillooly, director at Dot Dot Loans. “It is especially unreasonable for those with other debt and little savings. It is almost always an indicator of a budget overextension rather than an indication of an affordable expense.”
“Just because it’s normal to buy a car that leaves you with a $1,000 monthly payment doesn’t mean it’s something you should do,” said Melanie Musson, finance expert with Quote.com. “A $1,000 car payment is neither advisable nor affordable for the average American. Even if you have no other living expenses and earn an average income, you would be far better off saving up for the car you want and paying cash for it.”
“It has become normalized to have high auto expenses,” Gillooly added. “It is often a trap for consumers that puts them into long-term debt or poor financial habits. It is a better practice to save more, buy a less expensive car, and keep transportation costs under 15% of their monthly income.”
Who Can Afford To Buy a New Car?
With the federal minimum wage still sitting at $7.25 and consumer prices rising annually, inflation has quietly eroded the purchasing power of the lowest paid workers year after year. Unfortunately, people who need a vehicle to transport people or to earn a living have to pay increasingly high monthly payments and/or take on longer loan terms (84-month or longer loans accounted for 20.8% of all financed new-car purchases in Q4 2025, per Edmunds).
The industry has changed quickly over the past few years. As KBB explained, “Automakers are tailoring their lineups for a market in which households making $150,000 or more buy 43% of new cars. As the year ended, Nissan canceled the last new vehicle with a sub-$20,000 price tag.”
“To afford a $1,000 monthly auto expense, a consumer would ideally need to earn at least $120,000 a year, and have little other debt to manage,” said Gillooly. “However, a lot of people who take out these kinds of loans earn much less, stretch their car loans to 72 to 84 month terms and put themselves at risk of negative equity and repossession.”
Musson puts the income number even higher. She said, “To afford a $1,000 or more per month payment responsibly, you would need to earn close to $200,000 a year. And even then, you should be able to save up for a car and avoid high payments with high interest rates.”
The truth is, a monthly payment is the primary ownership expense, but there are lots of secondary ones.
“Owning a car involves much more than a monthly car payment,” noted Justin Fischer, an automotive analyst and expert at CarEdge.com. “Insurance, gas, maintenance, and depreciation all balloon the total cost of car ownership. If you’ve ever owned a car before, you know just how expensive it is. Plus, insurance costs continue to rise in 2026.”
Fischer spells out the cost dilemma that many drivers forget to factor when they buy a new car.
“Let’s consider the typical driver with a monthly car payment exceeding $1,000,” he said. “When factoring in monthly insurance premiums, fuel, and maintenance, total transportation expenses rise by hundreds of dollars per month.
“A conservative ballpark estimate would be $300 extra each month for insurance, fuel and maintenance. Considering these common expenses for drivers, a monthly take-home pay of $13,000 (or $160,000 a year) would be needed to comfortably cover all costs related to their vehicle.”
What Can Americans Do Amid Higher Car Payments?
What can Americans do to offset this high payment trend? Fischer believes that “Drivers should do their homework to better understand the total cost of a vehicle before deciding on a make or model. In 2026, there are dozens of free online tools that demystify the total cost of owning a car for any make and model. Understanding what you’ll be committing to financially BEFORE you buy can save you from financial distress down the road.”
If you’ve already committed to high monthly payments, Musson echoes what many Americans are already doing — holding on to their vehicles longer.
“Once your car is paid off, keep it. Don’t trade it in immediately,” she said. “You’ve already absorbed the bulk of the depreciation by the time your loan is paid off, so enjoy your car while it holds its value.”
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