Car Loan Trends 2025

Finance Trends

The first quarter of 2025 has come to a close, and the way people are financing new cars shows some eyebrow-raising trends. Many are feeling the squeeze of rising prices and are opting for longer loan terms—seven years or more, to be precise. Surprisingly, over 17% of shoppers are now shelling out more than $1,000 monthly for their cars.

Car Loans

More Americans are locking themselves into longer car loans than ever before. Data from Edmunds indicates that nearly one in five car buyers chose a seven-year loan in Q1 2025. That’s a noticeable increase from 13.4% back in 2019. Shorter-term loans are also on the rise, with 10.2% of buyers opting for terms of 48 months or less.

Interest and Payments

Monthly payments over a grand seem to be the new normal for 17% of buyers. The amount financed averages at $41,473, an uptick from last year’s $40,427. Meanwhile, zero percent financing is practically extinct, now only making up 1.1% of loans, with average interest rates holding steady at 7.1%.

Tariff Impact

The new administration’s tariffs on imported vehicles could make matters worse. With a 25% tariff now in effect, the cost of new vehicles might climb even higher, further straining budgets. Jessica Caldwell of Edmunds highlights this could push more shoppers toward seven-year loans, trapping them in long-term financial commitments.

Data Overview

Future Outlook

Proposals like tax deductions on interest paid for American-made cars are on the table but remain uncertain. Such tax breaks could ease some pressure, yet defining ‘American-made’ and implementing these measures could be complex.

Conclusion

In these financial conditions, used cars are becoming an appealing option. They’re generally less expensive and don’t tie buyers into as lengthy loan terms. As the market adapts to these trends, it’s a time for strategic thinking if a new car is on the horizon.