Auto Debt Soars to $1.68 Trillion as Car Prices and Interest Rates Climb

Key facts

• Total auto debt reached $1.68 trillion by the end of 2025.
• This represents a 37% increase from $1.23 trillion in late 2018.
• Nearly 86 million Americans carry outstanding auto loan or lease debt.
• The average new vehicle transaction price is nearly $49,000.
• The average auto loan origination balance was $33,519 at the end of 2025.
• Average monthly auto loan payments exceed $680.
• The average auto loan APR is nearly 10%, up from 7.5% in 2018.

A Looming Crisis in Auto Financing

Americans are now saddled with a staggering $1.68 trillion in auto debt, a figure that underscores a deepening financial strain on households. This record sum, compiled by a new analysis from The Century Foundation and consumer advocacy group Protect Borrowers, marks a significant escalation from previous years. The surge is forcing consumers to confront the harsh reality of escalating vehicle costs, elevated interest rates, and the necessity of longer repayment periods. This burgeoning debt is not merely an abstract number; it directly impacts millions of Americans' daily financial lives. "That extra money has to come from somewhere, which could be groceries, rent, savings, the emergency fund," noted Ivan Drury, director of insights at Edmunds. The consequences are tangible, as more of consumers' paychecks are consumed by car payments, leaving less for essential expenses and savings.

The Dual Pressures of Price and Interest

The primary driver behind this debt explosion is the dramatic increase in vehicle prices. The average transaction price for a new vehicle has climbed to nearly $49,000, a stark contrast to the $35,000 to $37,000 range seen in 2018. This jump, estimated between $12,000 and $14,000 over less than a decade, has outpaced income growth for many. Compounding the affordability crisis, interest rates on auto loans have also risen. The average annual percentage rate (APR) now stands at nearly 10%, up from 7.5% in 2018. This dual pressure of higher sticker prices and increased financing costs forces buyers into longer loan terms, pushing the average origination balance to $33,519 by the end of 2025, an increase of approximately $10,000 since 2018. Consequently, typical monthly payments have surged to over $680 from $506.

Millions Caught in the Debt Trap

The scale of the auto debt problem is immense, with nearly 86 million Americans, or about one in four adults, carrying outstanding auto loan or lease debt. This widespread burden is particularly acute in states where personal vehicle use is most essential, such as Texas, Alaska, Louisiana, and Florida. "People are seeing more and more of their paychecks eaten by their car payments," stated Angela Hanks, chief of policy programs at highlights that a car is often not a luxury but a critical economic lifeline for working families. Tara Mikkilineni, a senior fellow at Protect Borrowers, emphasized that "working families deserve relief and they deserve to have a government that is watching out for them, not allowing lenders and auto dealers to rake in record profits at their expense."

Economic Headwinds and Shifting Markets

The current economic climate, marked by geopolitical events such as the war in Iran, has exacerbated these financial pressures. Elevated gasoline prices, with a national average reaching $4.53 per gallon, add another layer of cost to vehicle ownership. This situation is further complicated by a shrinking supply of affordable vehicles, with virtually no new cars available for under $20,000. Automakers have increasingly focused on higher-income consumers, a strategy that has diminished options for budget-conscious buyers. In 2017, 36 models were priced at $25,000 or under; that availability has since dwindled significantly. This market shift leaves fewer choices for those who previously relied on lower-priced vehicles.

Auto Debt's Ripple Effect on Broader Finances

The financial strain of auto debt extends beyond monthly car payments, creating a cascade of broader financial pressures. Borrowers with auto loans exhibit significantly higher and faster growth in credit card balances, irrespective of their income level. Between early 2018 and late 2025, credit card balances for middle-income borrowers with auto debt surged by 31%, compared to a 17% increase for those without auto loans. For individuals with extended-length auto loans, their credit card balances can reach nearly twice their monthly income, indicating a substantial spillover effect into other areas of personal finance.

An Uncertain Road Ahead

The confluence of rising car prices, higher interest rates, and increased fuel costs paints a challenging picture for American consumers. The record levels of auto debt suggest that many households are operating with little financial cushion, making them vulnerable to further economic shocks. The analysis by The Century Foundation and Protect Borrowers serves as a stark warning about the sustainability of current auto financing trends. As millions of Americans grapple with these escalating costs, the question remains whether incomes will eventually catch up or if further interventions will be necessary to alleviate the growing burden of auto debt.

The bottom line

• Total auto loan and lease debt in the U.S. has reached an unprecedented $1.68 trillion as of late 2025.
• This debt burden has grown by 37% since late 2018, driven by soaring vehicle prices and higher interest rates.
• Nearly 86 million Americans, approximately one in four adults, are currently financing a vehicle.
• The average price of a new car has increased by over $12,000 since 2018, now nearing $49,000.
• Higher auto loan payments are forcing consumers to divert funds from other essential expenses and savings.
• Auto debt is linked to increased credit card balances, indicating a broader financial strain on borrowers.