- Median monthly car payments have climbed from $390 to $525 since 2019.
- Borrowers risk going underwater as loan terms stretch toward seven years.
- April 2026 set a new record with 29.7% of loans running past 72 months.
Auto debt has been steadily rising, with some pretty headline-worthy increases recorded since 2019. But rather than there being some kind of pullback from lenders, the alarm switch is very much in the off position. In fact, new car loan approvals were up in April compared to March.
So, why aren’t the big guys worried? Sanjiv Yajnik, President of Capital One Auto, one of the country’s largest auto finance lenders, recently shared with CNBC why he isn’t highly concerned about rising consumer auto debt, or the so-called ‘forever loans’ factor.
Read: Seven-Year Car Loans Were a Red Flag a Decade Ago, Now They’re The Norm
“If you look at every quintile of salary and earnings of people, the payment-to-income ratio has remained fairly flat,” said Yajnik. What this means is that despite median monthly car ownership payments jumping from $390 to $525 since 2019, vehicle costs have remained stable in comparison to income. The overall payment-to-income ratio has held at roughly 10%, and that’s across every income bracket, not just the top end.
“The consumer is being cautious. They’re being responsible. This is a much healthier way to do things than the alternative, because it’s not a discretionary spend,” says Yajnik. The data says that 80% of customers who finance vehicles are below the payment-to-income threshold of 15%, which is the generally recognized danger line. Of course, the cost of keeping your monthly auto loan payment manageable means taking on longer loan terms.
That’s Not Good News For Customers
While the lenders may not be panicking, it’s not great news for the rest of us. The industry as a whole views these “forever loans”, typically 84 months, seven years, or more, as detrimental to customers. That’s because you can become what’s known as ‘underwater’ in terms of equity when the loan is settled.
In layperson’s terms, it means that you’ve spent more on the loan and interest payments than you would receive at the time if you were to trade your vehicle in. Basically, you owe more than it’s worth. And you don’t need to be a finance whiz to know that isn’t good for your financial health and independence.
More Than Half of Buyers Are Already Underwater
The numbers show how widespread the problem already is. According to Cox Automotive, loans stretching beyond 6 years or 72 months hit a new all-time high in April at 29.7%, up roughly 470 basis points from a year ago. Negative equity is the bigger flag. 58.5% of borrowers are currently underwater on their auto loans, a figure that has eased slightly from a recent record but still sits nearly 540 bps above where it was a year ago (53.1%). More than half of car buyers, in other words, already owe more on their vehicle than it is worth.
Related: Used-Car Prices Are Back To 2023 Highs, And EVs Are Leading The Climb
The math on an individual loan tells the rest of the story. Setting a vehicle base price at a reasonable, by today’s standards, $30,000, and using a 9% APR as a baseline: with a four-year loan, you’d pay an average of $5,105 in interest by the end of the term. That puts your total outlay at $35,105, with a monthly payment of $731. Opt for a six-year loan to hit that more manageable $525 monthly figure, and your average interest component rises to $7,818. Total spent: $37,818.
Seven Years Is a Long Time to Owe a Car
And then there’s the 84-month, seven-year loan, now increasingly common. The monthly payment drops to an appealing $467, but that’s where the appeal ends. Your average interest component works out to $9,226, meaning you’ll have spent $39,226 by the time the final payment clears.
Seven years sounds manageable on paper. But a lot can change in that time, whether it be jobs, families, or other circumstances. And all the while, your car is depreciating faster than you’re paying it down. By the time you finally own it outright, you may owe more than it’s worth at trade-in, locking you into the same cycle all over again. Longer loans also extend the window during which maintenance costs begin to climb. And those bills sit entirely outside your loan, fuel, insurance, and other running costs.
