SANTA MONICA, Calif.–The number of auto loan borrowers who have opted for 84-month loan terms hit a new record during the second quarter of this year, with the $1,000-plus car payment now a reality for many, according to a new report.
Edmunds, a division of CarMax, said 22% of borrowers opted for the seven-year term as they tried to keep payments affordable.
“Record-high new car monthly payments, record-high financed totals and record-high loan terms,” Edmunds said in releasing its newest data. “American car shoppers broke several new car affordability records in the second quarter of 2025…”
‘Stark Reminder’
It added the new data offer a “stark reminder that the era of the $1,000-plus monthly car payment is well underway.”
Nearly 20% of new-car shoppers have agreed to monthly payments of $1,000 or more in the second quarter of this year (between April and June), according to Edmunds’ sales data. More borrowers — exceeding 22% — are opting for 84-month loans, which nearly doubled from six years ago, the company said.
Meanwhile, 0% finance deals have shrunk to less than 1%, shoppers are making smaller downpayments, and interest rates remain historically high at 7.2%, Edmunds added in its analysis.
“This affordability crunch adds up to another record high for the average amount financed on a new car loan: $42,388 in the second quarter of 2025, up from $40,873 just a year ago,” Edmunds stated. “What’s driving these record borrowing trends? It isn’t tariffs — yet. As of now, new car prices have remained relatively stable since last year. It’s about new-car shoppers trying to do more with less.”
Pulling the Levers
“It’s clear that buyers are pulling the few levers they can control to manage affordability, whether that’s by taking on longer loans, financing more, or putting less money down — even if some of those decisions increase their total costs,” Ivan Drury, Edmunds’ director of insights, said in a statement.
The company noted, however, that in this case, a bigger or fully loaded car now means more money later and less equity.
A Potential Storm
Edmunds said there are three key factors contributing to a “potential storm” for borrowers.
Expanding Loan Terms.
“Stretching a loan out over time may lower the monthly bill, but it saddles the borrower with more debt,” Edmunds explained. “Since interest is typically front-loaded on an auto loan, the borrower may have less equity in the car if they decide to sell it before the seven-year life of the loan expires. It happens more often than you’d think.”
People Get Bored With Their Cars
As a result, they “want to upsize into a larger vehicle after having a child, or even get a case of buyer’s remorse when they didn’t pay close enough attention to the sales contract,” according to Edmunds. “Any of these scenarios could lead to a borrower owing more money on the car than it’s worth, which is known as having negative equity or commonly referred to as being “upside down” or “underwater”” on the loan.”
“While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks associated with a loan extended that far into the future, including increased costs for upkeep down the line and the risk of being underwater on the loan if the car is traded in before it’s paid off,” Joseph Yoon, Edmunds’ consumer insights analyst, said in a statement.
Negative Equity
Edmunds noted that “if a borrower with a seven-year loan term trades in a vehicle with negative equity, any down payment the borrower makes will not touch the new car’s financed amount and will typically be used to reduce the negative equity. The remaining balance owed is then rolled over into the new loan. This, in turn, increases the risk of a higher interest rate, and it becomes a vicious cycle of debt carried over into subsequent cars.”
Edmunds said its data show that in the second quarter of 2025, the average borrower who financed with negative equity paid $15,881 in interest, versus $9,619 paid by a borrower without negative equity, according to Edmunds data.
