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What is the Average Monthly Car Payment?

By Autolist Staff | December 11, 2018

Unless you're the rare new-car buyer who has a stack of cash in the bank, it's likely you'll need to take out a loan the next time you're looking to buy a vehicle. A car loan means you're going to be making payments each month. So what is the average car payment in the U.S.?

In 2018, the average American was spending $515 on their monthly car payment for a new car and $371 for a used car.

This reflects an average price of $31,099 for a new car and $19,589 for used cars. (It's worth noting that these total average costs don't include interest charges on the amount people borrow).

Factors That Affect Your Monthly Car Payment

The two largest factors in the amount of your car loan -- and ultimately your monthly payments -- are the cost of the car and the interest rate on the loan. Sometimes additional fees are also rolled into the loan amount, including tax, tag and title charges. With a new car purchase, these costs can add thousands of dollars to the loan and therefore increase the monthly payments.

Saving Money on the Cost of the Vehicle
By doing your homework, you can save money on the cost of a new or used car. If you're thinking of purchasing a new car, be prepared to haggle over the price. Look for special deals on the vehicle you want. Dealerships offer discounts for a variety of reasons from recent college graduates to members of the military.

When visiting the dealership and working on the final price, let the salesperson believe that you plan to finance the car through the dealership's programs. In some cases, the dealership works to find a better deal for you if they believe you're financing with them.

Another option to consider is visiting other dealerships. For example, if you want to buy a Honda Accord, and it's priced at $30,000 at your local dealership, a more rural dealership might offer the same Honda Accord for $29,000.

When purchasing a used car, do some research about the year, make, and model vehicle you want. Look at the Kelly Blue Book value or another online price tool for the car you want. Many variables go into the price of a used car including mileage, accidents, demand and condition.

Don't just pay the price the owner asks for the used car. Offer the owner less and then negotiate a final price somewhere in between. You want to have a list of questions to ask the owner before agreeing on a price. You might be able to get a reduced price with this information from the number of owners to the maintenance records. Any money you can save on the price of a new or used vehicle helps to lower your monthly car payment.

Finding the Lowest Interest Rates
The second factor in your monthly car payment is the interest rate on the money you're borrowing to purchase the vehicle. Whether you finance your vehicle through your bank, the dealership's financial institution or another lender, you pay an interest rate based on your credit score and sometimes the length of time at your current employer or residence.

Check your credit score online before you start shopping for loans to help find the lowest interest rate. Clear up and/or dispute any incorrect information on your credit report. You may also pay down some of your outstanding credit card debt or another credit account to help boost your credit and therefore receive a lower interest rate. In some cases, it might be worth waiting a couple of months to establish your credit and find a lower rate.

Also, don't be afraid to play one bank off another. For example, if your local banks offers you a loan at 5 percent, then tell the dealership who offers you a 5 percent loan that you already have that offer. They might be willing to lower the interest rate a little to get your business. The difference between a loan at 5 percent and one at 4 percent could add up to hundreds or even thousands of dollars over the life of the loan.

Other Things to Consider to Save Money

While you might not be able to get a lower interest rate, you can reduce the number of months you pay on loan and pay less interest over the period of the loan. However, this increases your monthly payments. If you need a quick estimate, you can expect to pay $100 per month for every $5,000 you borrow on a five year or 60-month loan.

How much can you afford to pay towards a monthly car payment?

This is a question that you should answer before you start looking for that new or used car. Start by creating a monthly budget that includes all of your bills and all of your income. You want to include housing, food, clothing, utilities, and entertainment. You don't want to spend the next five years missing the latest movie because of your car payment. Remember that owning a car is more than just a monthly car payment. You also need to pay for gas, insurance, maintenance, repairs, and other essentials.

Remember

The average monthly car payment is an average. Your monthly car payment will vary based on a variety of factors, some that you can control and some you can't. Before buying a new or used car and committing to a car loan, make sure you're ready to make that monthly car payment for a few years. Unexpected things come up in life so make sure you have a safety net to fall back on.