It Is No Longer Unusual to Take 7 Years to Pay for a New Car—But It Is Frightening

• The average transaction price for a new vehicle has skyrocketed since 2020, and has now eclipsed $45,000.

• To afford a new vehicle, where a 60-month, five-year loan was previously the norm, buyers are now faced with 72-month payment terms—with 84 months now the new extended-loan period.

• Leasing has shrunk as an option. TrueCar says traditionally one in three cars has been leased; today it’s more like one in six.

One of the first cars you see at the New York International Auto Show’s Chevrolet booth is not a Corvette or a Camaro, it’s a Chevrolet Trax—the least expensive car that the company makes (with a starting price of just $21,495). A takeaway from that, says Alain Nana-Sinkam, senior vice president of business development at TrueCar, the automotive digital marketplace that connects consumers to dealers, is that Americans are finding it hard to deal with ever-climbing average transaction prices.

With inflation and rising interest rates hitting car buyers where they live, and with leasing having shrunk as an option, many consumers have had to rely on longer financing periods. “Not so long ago, a 60-month, five-year loan was the norm, and 72 months was the extended loan,” Nana-Sinkam said. “Now 72 months is the norm and 84 months—seven years—is the extended.”

That’s a lot of time to be paying for a car. With that kind of financing, the consumer will be paying a monthly fee much longer into the vehicle’s useful life, will ultimately pay more in finance charges, and will take longer to pay off the principal.

According to TrueCar data, the average transaction price for new vehicles is up 5.6 percent from a year ago, to $45,397. Kelley Blue Book offers a higher number, $48,763, which is actually down from $49,468 in January—but still a lot of money for strained households. Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, reports that “new models, richer product mix, and limited discounting are contributing to elevated prices.”