Is Your Car Payment Higher or Lower Than Other Americans'?

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Cars are a necessity rather than a luxury in most parts of America, as there is simply not adequate public transportation to get everywhere you want to go. Unfortunately, they're also very expensive and most people can't pay for them outright, so they have to borrow money to buy a vehicle.

Having an expensive car loan payment can make it difficult to accomplish other goals, like funneling money into your savings account, since you're devoting so much of your spare cash to your vehicle. It can be helpful to see how your car payment stacks up to your fellow Americans to see if you're making a higher or lower payment relative to others.

Here's how much the average American is paying for their car

According to research conducted by The Motley Fool Ascent, the average monthly payment on a new car is $735 as of the first quarter of 2024, while the average monthly payment on a used vehicle is $523. The average amount that Americans owe on their auto loans is $24,035.

Those payments are pretty high, with even a used car costing a total of $6,276 per year just for the typical loan -- not including added costs like auto insurance, gas, and maintenance. New cars, of course, are even more expensive to buy, although their ongoing operating costs may be lower if they require fewer repairs over time.

Your personal car payment may be higher or lower than these amounts owed by your fellow Americans. The amount you owe will depend on factors like how much you borrow, how long your loan term, and what rate you're offered.

Still the data is clear that many people are paying a lot for their vehicles. If your payment is at or above the average monthly payment, you're likely devoting a significant chunk of your income to this one monthly expense, perhaps at the expense of others that are more important in the long run.

How to make sure your car payment doesn't interfere with your financial goals

While car payments may feel like a fact of life, the reality is that you can try to avoid getting stuck paying upward of $6,000 every year just to borrow to buy a car that's going down in value.

One of your best options is to drive your vehicle for as long as possible. If you can keep your car past the point where you've paid off your auto loan, you can redirect all that money you'd be putting toward your monthly payment into something better -- like saving for your future.

Once your car is paid off, you can even put the payments you were making into a special savings account to save up to buy your next vehicle outright without a car loan. If you do this, you can avoid the extra interest costs that are tacked on and put more of your money toward retirement investing or other goals.

You should also aim to buy the cheapest vehicle you feel is safe and reliable and try to stick with used vehicles, as the data shows your payment will be a lot lower. Remember, new cars start to decline in value as soon as you drive them off the lot, so why pay a lot of extra money each month for an asset that's going down in value by the day?

Whether your payment is higher or lower than your fellow Americans' car payments, if you follow these tips, you can work toward having no car loan payment at all, and perhaps enjoy a brighter financial future because of it.

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