What's the Average Monthly Car Payment? Find Out Here

What's the Average Monthly Car Payment? Find Out Here

These days, now more than ever, purchasing a new or used vehicle is a sizable financial decision. With the average price of a new car averaging $40,000 in 2021, and used ones still a substantial $25,000, you have to be careful how you spend your money.

With most buyers choosing to finance their purchases via car loan, spreading their obligation over months and years, they're able to afford the vehicles they want while still having money for daily expenses. 

But when you decide to purchase a vehicle, how much should you be paying per month? It's probably a good idea to know today's average car payment and whether moving forward with a purchase fits your budget.

Let's look at the average car payment, auto loans, and the factors that affect both.

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What is the average car payment?

As of 2021, the average monthly car payment in the U.S. is $575 for new vehicles and $430 for used vehicles. New cars buyers borrow an average of around $34,000, while used buyers need about $21,000. 

With today's vehicles as appealing as ever, buyers are willing to fork over more of their hard-earned money to get behind the wheel. Consequently, the average length of an auto loan is now 70 months – nearly six years – which makes monthly payments lower when compared to shorter-term loans of the past. 

When it comes to your monthly payment amount and the terms of your loan, it all depends on your budget and the car you’ve decided on buying. Extending the length of your loan lowers your monthly payments, allowing you to drive away in a more expensive car with additional features. 

Shift takes all the hassle out of figuring out your monthly payment. Friendly and non-pushy concierges will work with you to get you a car and loan that will fit your budget.

The components of a car payment

When you make car payments on an auto loan over months and years, you're not just paying for the price of the car. Each monthly payment consists of different pieces that go toward specific obligations contained in your loan.

The most sizable chunk of your payment goes toward the actual amount you borrow, also known as the principal. You can think of the principal, like when you borrow money from a friend and pay them back the exact amount. 

But lenders need to make money when they provide loans, so you're responsible for additional interest and fees. The interest rate on a car loan is a percentage of the principal charged over the term length. And you may be obligated to pay additional fees to the lender, further increasing your monthly payment.

Interest and lender fees combine to form your auto loan's annual percentage rate or APR.

Each month, your car payment is a combination of these fees added to the principal.

Whether you're in the market for a pickup truck or an electric car, Shift makes financing easy. Shift works with a network of trusted lenders, securing you the best deal on financing. And Shift has best-in-industry service contracts, so you know your vehicle is good to go, mile after mile.

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How credit score affects car payments

Though the average car payment in America may appear expensive or manageable, depending on your budget, there's more to it than simply paying back the money you borrow.

The terms of your loan, like interest rate, APR, and length, all affect the monthly payment and can make a substantial difference in how much it runs. 

And the factor that affects those terms more than anything else is your credit score. Borrowers with higher credit scores are eligible for lower interest rates, while those with high credit scores pay a premium to secure a loan. While the interest rate might seem like a small detail, it can either save or cost you thousands of dollars throughout an auto loan.

Before you seek out financing, it's a good idea to obtain your credit report from one of the major credit bureaus like Experian or Equifax. A credit report gives you a clear picture of where you stand when lenders research your financial history. And when you view your credit report, it allows you to iron out any discrepancies and take care of outstanding obligations, possibly raising your score. 

Shift's website has a large selection of fully inspected cars located across the country that are ready to go. The website is user-friendly, and you'll be able to find various makes and models to suit your needs and budget. 

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Benefits of longer-term loans

Longer-term loans offer some benefits when you’re trying to get behind the wheel of a more expensive vehicle or need to save money month to month. 

By extending your loan, you can extend your budget a little. If you are looking to get into a slightly larger car than your budget allows (planning to start a family) by extending your loan terms you can stay within your monthly budget while getting a car that will work for you longer.

With historically low interest rates you can often finance (and extend your loan terms) and invest the money you didn't put down on a car and be better off.

When you buy your next vehicle, let Shift handle the details. Shift will process all necessary paperwork, including DMV forms, title, transfer, and registration.

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Calculating your average car payment

When you're shopping for your next vehicle, it can be helpful to know what you'll owe per month. 

The easiest way to do this is by using an auto loan calculator. Available online, auto loan calculators consider your down payment, total amount borrowed, interest rate, and term length. 

Using this information, an auto loan calculator provides you with a monthly amount, so you'll know your car payment before moving forward with your purchase. 

When you're shopping for a used car, finding an example in excellent condition is a prime consideration. Shift's certified mechanics perform extensive 150-point inspections on every car and have complete vehicle history reports, so you know your used car feels as good as new

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Average monthly car payment in summary

Though your average car payment is a significant financial aspect of your vehicle purchase, it doesn't tell the whole story. Even if you owe what seems like a workable sum each month for your car payment, other factors like the term of your loan and the interest rate paint a clearer financial picture. 

When it comes time to purchase your next vehicle and take out a car loan, the total cost after financing is the most important figure.

And if low monthly payments appeal to you, remember that they cost you more money in total when paired with longer-term loans.

Shopping for a used car and want to take a test drive? If you live in one of Shift's many service areas, a concierge will drive your vehicle to you for no charge, letting you get a feel for its driving performance and interior. 

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Author
Shift Editorial Team