23% of Americans Say Their Car Payments Strain Their Budgets — 4 Ways To Avoid This
Written by
David Nadelle
Edited by
Cory Dudak
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In January 2024, Kelley Blue Book (KBB) celebrated an average transaction price for new cars of $47,401, which was a 3.5% drop from the previous year and a 2.6% month-over-month decline from December 2023. Fast forward to the beginning of 2025, and the price of new vehicles averaged $49,740 — close to a record high.
For many American drivers, financing — whether a loan or a lease — is the only way to purchase a vehicle. With so many low- and middle-income individuals and households struggling to get ahead, budgets are being stretched beyond the breaking point.
According to a 2024 JW Surety Bonds study asking 1,000 participants about their car ownership experiences, 23% of Americans were found to be “car poor” — spending more than they can afford on their car — and half of respondents admitted to delaying auto repairs or upgrades due to economic hardship. Additionally, those surveyed said they have sacrificed other savings — investments (54%), retirement (38%), homeownership (20%) and education (15%) — to afford their car payments. Finally, 44% of respondents said they felt stressed about their car payments.
High car payments will only be a part of your everyday life if you don’t take action. Here are four ways you can sidestep becoming car poor.
Always Buy Used
New-car smell is nice, but it shouldn’t be a reason to buy a car. Because new cars cost so much, the used market is now more expensive than it should be (although the average used vehicle listing price is now 2% lower year-over-year and decreased each week in January, per KBB). However, unless you make throwaway money, you should consider looking at a used car when it’s time to get a “new-to-you” car. If you’re looking to save money, driving a reliable pre-owned vehicle at a price you can afford may be the favorable option.
If You’re Buying New, Pick an Efficient Model
Fuel efficiency can be key to cutting down on your overall automotive costs. Over the course of a vehicle’s lifespan, you can save thousands of dollars by selecting a more economical car. Plus, you’ll spend less time and money fueling up at the pump. Generally speaking, a vehicle that uses less fuel needs less upkeep, repairs and servicing, and will last longer than a wasteful model.
Avoid Long-Term Financing
A longer-term loan may allow you to make a smaller monthly payment and help spread out your payments further, but it will also cost you more in interest. Six-, seven- and eight-year car loans are common nowadays, but you should try to keep your loan at 48 or 60 months (or less). If possible, choose the shortest loan term you can afford, and a term that is less than the warranty period so that you are covered if something goes wrong. As Consumer Reports noted, knowing how fast vehicles depreciate in value, you don’t want to be saddled with owing more than your ride is worth (commonly referred to as as being “underwater” or “upside down”).
Prioritize Your Needs
What do you need in a vehicle? You might have preferences with make, model and color, but there are more pressing things to consider. Bear in mind what size of vehicle you’ll need, the typical number of passengers you’ll have when driving, how much cargo space is necessary, along with what must-have features you can’t live without (heated seats, GPS). How often will you be driving and what type of driving will you be doing (city, highway, off road)? If you know want you need, you won’t get suckered into paying for features you’ll never use.
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