Edmunds Data Sounds Alarm on New Car Affordability: Buyers Stretching Limits with Low Down Payments, Longer Terms, and High APRs
New data from Edmunds paints a concerning picture of new car affordability, indicating that buyers are increasingly stretching their financial limits. In Q3 2025, the average new-vehicle down payment dropped to its lowest level since Q4 2021, reaching just $6,020. This trend, coupled with rising loan amounts, high interest rates, and extended loan terms, suggests a market where the average consumer is struggling to afford new vehicles, despite some modest discounts.
Key Trends Highlighting Affordability Concerns (Q3 2025 Data):
Edmunds’ analysis reveals several key indicators of strained buyer budgets:
- Lowest Down Payments in Four Years: The average new-vehicle down payment fell to $6,020, the lowest since Q4 2021.
- Rising Loan Amounts: The average amount financed on new vehicles increased to $42,647, up from $40,713 in Q3 2024.
- Persistent High Interest Rates: The average new-vehicle interest rate remained at 7%, marking the third consecutive quarter at or above this threshold.
- Only 3.4% of loans were at 0% APR.
- 71.6% of buyers signed onto loans with 5% APR or higher.
- 13.8% secured an APR of 10% or higher.
- Extended Loan Terms: The average new-vehicle loan term stretched to 70.1 months, with 22% of buyers committing to 84-month or longer loans.
- High Monthly Payments: 19.1% of buyers are now facing monthly payments of $1,000 or more.
Comparative Data (Q3 2025 vs. Q2 2025 vs. Q3 2024):
| Metric | Q3 2025 | Q2 2025 | Q3 2024 |
| Average new-vehicle loan term (months) | 70.1 | 69.8 | 68.8 |
| Average new-vehicle monthly payment | $754 | $756 | $736 |
| Average amount financed on new vehicles | $42,647 | $42,388 | $40,713 |
| Average new-vehicle interest rate | 7% | 7.2% | 7.1% |
| Average new-vehicle down payment | $6,020 | $6,433 | $6,619 |
New vs. Nearly-New: A Shifting Value Proposition
Despite the alarming affordability trends, Jessica Caldwell, Edmunds’ head of insights, argues that new vehicles may still be a more compelling option than “nearly-new” used cars. This is due to constrained inventory in the used car market (a result of pandemic-era sales and reduced leasing) and the potential for lower APRs on new vehicles compared to higher used car rates. The modest discounts available on new cars in Q3 2025 may have provided a boost to the new car market.
Discounts and Model Year Shifts:
Edmunds experts noted a slight advantage for buyers targeting older model years as dealerships transition inventory.
- 2025 Models: Average interest rate of 6.9% with an average discount of $2,119 from the sticker price in Q3 2025.
- 2026 Models: Average interest rate of 7.1% with a smaller discount of $1,431.
However, Ivan Drury, Edmunds’ director of insights, cautions that these differences are narrow and not necessarily a clear sign of widespread “deals.” He advises buyers to prioritize desired features and conduct thorough research, as the optimal purchase strategy is less obvious than in previous years. The data suggests that while some discounts exist, they are often offset by higher financing costs, pushing buyers to their financial limits.
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