20% of new-vehicle buyers paying over $1K per month in Q4

Monthly payments for new and used vehicles continued to rise in the fourth quarter of 2025 as affordability pressures held despite rate cuts. Around 20.3% of new-vehicle buyers agreed to monthly payments of $1,000 or more in Q4 2025, up from 18.9% in Q4 2024 and 19.1% in Q3 2025, according to an Edmunds report published this week. The average monthly payment for new cars rose 2.4% both year over year and quarter over quarter to $772 in Q4, according to Edmunds. The average monthly payment for used vehicles rose 0.9% YoY to $570, up 3.1% from Q3. [caption id="attachment_58358015" align="alignnone" width="1997"] (Courtesy/Canva, data from Edmunds)[/caption] Leasing up More consumers at Tampa, Fla.-based Morgan Auto Group are leasing new vehicles or seeking pre-owned vehicles as “a direct reflection to affordability [challenges],” Justin Buzzell , vice president of financial services at the group, told Auto Finance News . Manufacturers are encouraging leasing to drive new-car sales, he said. Industrywide lease penetration landed at 25% in December 2025 , compared to a bottom of 16% in late 2022. “They are in the business to sell new cars, and they know that customers aren’t making any more money than they have in the last few years,” Buzzell said. Despite higher monthly payments, some economic headwinds have plateaued , Joseph Yoon , consumer insights analyst at Edmunds, told AFN . For example, while new-vehicle average transaction prices (ATPs) trended up through 2025 , the ATP never reached $50,000, defying market expectations, he said. [caption id="attachment_58358016" align="alignnone" width="717"] (Courtesy/Edmunds)[/caption] However, consumer conditions have not improved. Instead, the “market has hit a limit” on what consumers “can stomach,” so affordability challenges are lingering, Yoon said. “We’ve seen growth in the monthly payment and an increase in the amount people are borrowing … and people [are] putting less money down than before." — Joseph Yoon, Edmunds 84-plus-month terms make up 20% of new-car loans Around 20.8% of financed new-car purchases had 84-month or longer loan terms in Q4, up from 17.9% in Q4 2024, but down from 22% in Q3 2025, according to the report. The average new-vehicle loan term reached 69.6 months in Q4, up from 68.8 months in Q4 2024 but down from 70.1 months in Q3 2025, according to the report. The average used-vehicle loan term was 70.1 months, up from 69.5 months in Q4 2024 and 69.9 months in Q3 2025. If consumer budgets continue to tighten, longer loan terms may be “an inevitability,” Yoon said. “It’s no longer surprising to me that people take out an 84-month loan because of how much these cars cost,” he said. Jacksonville, Fla.-based VyStar Credit Union provides auto loan terms of up to 84 months , Senior Vice President of Consumer Lending Dennis James told AFN . However, consumers taking out those loans sell or trade in vehicles, on average, at 74 months for new vehicles and 69 months for used vehicles, he said. Amid affordability concerns, VyStar integrated additional AI, machine learning tools and “advanced risk assessment tools” into credit-decisioning in 2025 to prevent losses and “serve members across the credit spectrum,” James said. “Applicants facing cash flow challenges in today’s inflationary environment are less likely to succeed in repayment, so we’ve focused on mitigating risk,” he said. The credit union saw “slight month-over-month” increases across its direct and indirect loan portfolios in Q4 2025, he said, without providing specifics. VyStar was the 56th-largest auto lender by originations at yearend 2024, with total originations of $1.2 billion, according to Big Wheels . Interest rate, used-vehicle tailwinds VyStar anticipates the auto finance industry will experience “moderate growth in 2026,” in part from interest rate cuts and steady consumer demand, James said. “Overall, we expect 2026 to resemble 2025, with minimal growth and gradual asset quality stabilization,” he said. The Federal Reserve cut the benchmark rate three times in 2025, though the Fed Open Market Committee suggested uncertainty around when the next rate cut may come after the latest Dec. 10 reduction. However, Fed rate cuts may not touch car buyers who do not fit a lender’s ideal borrower profile, Edmunds’ Yoon said. “If you need to take out a loan that’s not within the ideal conditions of whatever a bank considers a good loan, then those interest rate cuts are meaningless." — Joseph Yoon, Edmunds Meanwhile, dealers and analysts anticipate growth in the used-car market. [caption id="attachment_58358014" align="alignnone" width="1997"] (Courtesy/Canva, data from Edmunds)[/caption] Cars leased from 2020 to 2023 should return to the market in 2026, which could lead to more used inventory, Yoon said. With more supply, prices may drop. Lenders who work with Morgan Auto Group are increasingly competitive, as they expect major growth from the used-car market in 2026, Morgan Auto’s Buzzell said. “Every lender conversation and meeting I’ve had … they are all talking about monster [sales] increases,” he said. “The biggest [companies] in used cars are saying they’re going to have a record year [this year].” Auto Finance News will present multiple invaluable events for industry professionals in 2026, starting with Auto Finance Summit East and Auto Finance Capital Summit in May. To see event agendas and register, visit autofinance.live .

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