Managing Money In A Crisis
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What is the average car payment?
See how your car loan stacks up to the national average.
The average monthly car payment continues to rise, as does the loan term borrowers are choosing. Find out what this means for your own car loan — and how your credit score affects how much you pay each month.
What is the average car payment?
In mid 2019, the average monthly car payment was $550 for new vehicles and $392 for used vehicles, according to Experian’s State of the Automotive Finance Market Report.
However, how much you ultimately pay each month will depend on a variety of factors, including:
- Down payment. Experts recommend making a down payment of around 10% to 20% of your car’s value. This limits how much you have to borrow, which can greatly reduce what you pay each month.
- Loan amount. The amount you borrow will be how much you have to pay back. The larger your loan principal, the more your monthly payment will be.
- APR. The interest and fees you pay on your loan. Borrowers with better credit will qualify for lower rates, reducing their monthly payments.
- Loan term. The longer your loan term, the smaller your monthly payment will be — but you’ll pay more in interest overall.
- New or used. New cars tend to have lower interest rates than used cars. The average rate for a new car in mid 2019 was 6.27%, while the average rate for a used car was 10.07%.
What does the average car loan look like?
The average car loan looked something like this as of mid 2019:
| New cars | Used cars | |
|---|---|---|
| Loan amount | $32,119 | $20,156 |
| Interest rate | 6.27% | 10.07% |
| Loan term | 69 months | 65 months |
| Monthly payment | $550 | $392 |
| Credit score | 717 | 656 |
But this doesn’t tell the whole story. Two people can have the same payment despite having car loans that look nothing alike.
For example, these loans have the same monthly payment of $595, but the interest paid is over $5,000 more on the second loan.
| Loan amount | Loan term | APR | Monthly payment | Total interest paid |
|---|---|---|---|---|
| $20,000 | 3 years | 4.5% | $595 | $1,418 |
| $28,000 | 5 years | 10% | $595 | $7,695 |
How does my credit score affect my car payment?
Your credit score will play a role in the interest rate you receive on your car loan. And since interest affects your monthly payment, borrowers with better credit scores will typically receive lower rates.
While it looks like people spend about the same amount per month on their car payments, your borrowing power will be impacted with a lower credit score.
There may only be a $30 difference between the average monthly payments for super prime and deep subprime borrowers, but the latter are paying significantly more toward interest.
| Credit score | Average new car monthly payment | Average used car mothly payment |
|---|---|---|
| Super prime — 781 to 850 | $516 | $383 |
| Prime — 661 to 780 | $559 | $384 |
| Nonprime — 601 to 660 | $575 | $394 |
| Subprime — 501 to 600 | $567 | $408 |
| Deep subprime — 300 to 500 | $546 | $411 |
When you’re ready to shop for a car, it’s important to pay attention to car loan interest rates in addition to the loan term. You’ll be able to afford much more car for the same amount of money when you have a higher score.
How does my loan term affect my car payment?
The longer your loan term, the lower your monthly payment will be. But it comes with one major downside: You’ll pay more in interest in the long run.
Let’s take a look at an example:
| Loan amount | APR | Loan term | Monthly payment | Interest paid |
|---|---|---|---|---|
| $15,000 | 7.7% | 3 years | $468 | $1,847 |
| $15,000 | 7.7% | 5 years | $302 | $3,120 |
Choosing a shorter term might make your monthly payment higher, but you’ll pay significantly less in interest over the life of your loan. We recommend picking the shortest term that comes with repayments you can comfortably afford to make each month.
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Bottom line
While the average monthly payment for a new car is around $550, this doesn’t mean you’ll necessarily end up spending that much each month. Buying a less expensive car, making a larger down payment, improving your credit score or extending your loan term are all ways to help lower the monthly burden on your wallet.
You can check out our guide to car loans to learn more about how it all works.
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