Analysts say the growing share of 7-year auto loans points to persistent affordability pressures in the car market
Santa Monica, Calif., April 03, 2025 (GLOBE NEWSWIRE) — Consumers continued to face elevated costs when financing new vehicles in Q1, according to Edmunds analysts. Edmunds’ most recent analysis of financed new-vehicle purchases reveals:
- New-car shoppers are shifting to loan term extremes amid economic pressures and incentives: Edmunds analysts report that 84-month loans hit an all-time high in Q1 2025, making up 19.8% of new-vehicle financing — up from 15.8% in Q1 2024 and 13.4% in Q1 2019. But the shift isn’t solely toward a longer term. Edmunds data also shows that shorter loan terms are gaining some ground: 10.2% of new-car buyers opted into terms of 48 months or less in Q1 2025, which is down slightly from 11.9% in Q1 2024 but up from just 7.1% in Q1 2019 — a trend Edmunds analysts attribute to well-qualified buyers capitalizing on incentives tied to shorter terms. Meanwhile, the middle ground continues to erode. Loans between 60 and 75 months accounted for 67.4% of new-vehicle financing in Q1 2025, down from 69.7% in Q1 2024 and 77.7% in Q1 2019 — reflecting a broader shift as consumers increasingly stretch or shorten loan terms to meet their financial goals.
- $1,000+ monthly payments are holding steady: The share of new-car buyers committing to monthly payments of $1,000 or more held steady at historically elevated levels in Q1 2025, landing at 17.7%. This modest drop from 18.9% in Q4 2024 aligns with typical seasonal patterns, as luxury vehicle sales generally see an uptick in Q4 and ease in Q1. On a year-over-year basis, the percentage of buyers with the highest monthly payments remain virtually unchanged, with 17.3% of new-car buyers exceeding the $1,000 mark in Q1 2024.
- Consumers are still financing more than an average of $40K for new vehicles: The average amount financed for new-vehicle purchases in Q1 was $41,473 in Q1 2025 compared to $42,113 in Q4 2024 and $40,427 in Q1 2024.
- 0% finance deals have all but evaporated, falling to a record low. In Q1 2025, 0% finance deals accounted for 1.0% of new-vehicle loans — the lowest share Edmunds has on record. By comparison, they made up 1.1% of loans in Q3 2023 and 3.0% in Q1 2024. Once a common incentive used to entice buyers, these deals have steadily declined in today’s high-rate environment, signaling a clear end to the era of “free money” financing.
- Interest rates remain historically high. The average new-vehicle annual percentage rate (APR) in Q1 2025 was 7.1%, up from 6.8% in Q4 2024 and the same as it was in Q1 2024.
“The auto finance market showed signs of steadiness in Q1, but that stability doesn’t mean affordability has improved,” said Jessica Caldwell, Edmunds’ head of insights. “When one in five new-car buyers are taking on seven-year loans, it’s clear how many consumers are still financially stretched. Even with rates holding relatively flat, the continued reliance on extended terms and high monthly payments reveals how challenging car buying remains. And now, with auto tariffs officially taking effect today, there’s a risk that they will add fuel to the fire — triggering a disruption that could push vehicles even further out of reach for many shoppers.”
As affordability pressures persist in the auto market, Edmunds analysts note that new policy proposals — such as President Trump’s suggestion to allow consumers to deduct interest paid on loans for American-made vehicles — could serve as powerful incentives for car buyers. Edmunds data shows that the average interest paid for a financed new vehicle averaged $9,231 in Q1 2025.
“In theory, a tax break like this could provide real relief to consumers, especially with total interest paid on a new-vehicle loan amounting to what could otherwise be used toward a home renovation project or vacation,” said Caldwell. “But there are still a lot of unanswered questions — from how ‘American-made’ would be defined to how this would be implemented and who would qualify. Until those details are clarified, it’s hard to gauge how much effect a policy like this could have on the market.”
Quarterly New-Car Finance Data
(Averages)
| 2025 Q1 | 2024 Q1 | 2024 Q4 | |
| Term | 69.5 | 68.3 | 68.8 |
| Monthly Payment | $741 | $735 | $754 |
| Amount Financed | $41,473 | $40,427 | $42,113 |
| APR | 7.1 | 7.1 | 6.8 |
| Down Payment | $6,511 | $6,682 | $6,856 |
Quarterly Used-Car Finance Data
(Averages)
| 2025 Q1 | 2024 Q1 | 2024 Q4 | |
| Term | 69.7 | 69.7 | 69.5 |
| Monthly Payment | $550 | $546 | $533 |
| Amount Financed | $28,338 | $27,774 | $28,675 |
| APR | 11.3 | 11.7 | 11.0 |
| Down Payment | $4,078 | $4,133 | $4,219 |
About Edmunds
Edmunds guides car shoppers online from research to purchase. With in-depth reviews of every new vehicle, shopping tips from an in-house team of experts, plus a wealth of consumer and automotive market insights, Edmunds helps millions of shoppers each month select, price and buy a car with confidence. Regarded as one of America’s best workplaces by Newsweek, Fortune, Great Place to Work and Built In, Edmunds is based in Santa Monica, California. Follow us on TikTok, Twitter, Facebook and Instagram.
###
CONTACT: Talia James-Armand Edmunds 310-491-8738 pr@edmunds.com
- Salarius Pharmaceuticals Granted Additional Extension to Regain Compliance with Nasdaq’s Stockholders’ Equity Standard - July 14, 2025
- Derma Fillers Market worth $7.32 billion by 2030 with 12.1% CAGR | MarketsandMarkets™. - July 14, 2025
- GoldenMining integrates into the XRP blockchain to improve cloud mining settlement speed and revenue - July 14, 2025
