Seven-Year Car Loans Hit a Record. Here’s What Advisors Should Ask Clients

In January, we looked at how Americans were stretching car loans beyond six years just to make monthly payments more manageable. Nearly a year later, the trend is still picking up speed.

According to Edmunds, the average amount financed for a new vehicle hit a record $44,664, while monthly payments climbed to $787. Both figures have risen over the past year, reflecting how higher vehicle prices continue to squeeze household budgets.

Rather than stepping away from the market, buyers are adjusting how they finance their purchases. A record 25.5% of financed new-car buyers took out loans lasting at least 84 months, up from 21.8% a year earlier. Additionally, those spending more than $1,000 on payments each month continue to grow, reaching 21.2%, up from 19.1% this time last year.

Outside of the Fed’s interest rate hike last month, rates have been relatively flat over the past year, however, borrowing costs have not. The average auto loan APR remained at 7% for the third consecutive quarter, yet the average interest paid over the life of a new-car loan reached $9,938. Larger loan balances and longer repayment periods are driving up the total cost.

For financial advisors, this is a reminder that affordability isn’t always reflected in a client’s monthly budget. A lower payment can make a purchase feel manageable while masking the longer-term trade-offs. An 84-month loan may free up cash today, but it also keeps a household committed to debt for seven years, potentially limiting its ability to save, invest, or handle unexpected expenses.

Auto financing can be a useful entry point for a broader financial conversation. Advisors might ask clients how long they have left on their car loans, whether they’re planning another vehicle purchase soon, and how those payments fit into their savings goals. A car payment may seem like a routine expense, but when the average buyer is borrowing nearly $45,000 and paying almost $10,000 in interest, the financing decision deserves a closer look.

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