Car payments have gotten so out of control that even the excitement of getting a new ride doesn’t overcome the price point pain. Today, car payments are often several hundred dollars more than what you could get just a few years back. The price creep has one woman contemplating whether a trade-in is worth it or if the real sign of luxury is driving around in an older but fully paid off car. It has people fiercely divided. Car Payment Wake-Up Call In a viral video with more than 2.6 million views, content creator @thee_secretbakup asks a simple question: "How much is your car payment?" She says that "it's crazy to me people are driving around with $700 car payments," and that's before insurance even enters the conversation. The TikToker says she'd always told herself that when it got close to the payoff date for her car, she’d trade it in and start fresh. But when the time came, the reality of the situation was different. "The moment I hit that last car payment, I said, 'No ma'am,'" she says. She's not trading in anything, "I'm a drive this [expletive] till the engine fall out," she says. Why Have Car Payments Gotten So Expensive? According to NerdWallet, the average monthly payment for a new car hit $748 in the third quarter of 2025. That number only climbed from there. By the fourth quarter, the average new car payment had reached an all-time high of $772 a month, according to CNBC, and more than one in five new car buyers were locked into payments of $1,000 or more. The bigger picture is even grimmer. The average new car now costs nearly $50,000, up from $38,400 in 2019, and the average interest rate on a 60-month loan is sitting at 7.22%, according to the New York Times. To make payments more manageable, people are taking out loans that take much longer to repay. More than 20% of auto loans in 2025 were for 84 months (seven years) or longer. As one Edmunds analyst put it, a new car payment has started to feel like "a second mortgage." It's a cycle that's pushing people away from dealerships, with total US auto sales expected to dip to around 16 million vehicles this year. Will 2026 Be Any Better For Car Prices? This year, consumers may get some relief on the car payment front, but that’s far from a sure thing. The Federal Reserve made three interest rate cuts in late 2025, and while experts expect the pace to slow, falling rates could bring some relief for shoppers. Automakers are also expected to roll out more incentives to help move inventory, per CNBC. There's a new auto loan interest deduction of up to $10,000 per year available for vehicles purchased between Jan. 1, 2025, and Dec. 31, 2028—though it only applies to new, US-assembled vehicles used for personal use, and phases out for individuals earning over $149,000 or couples over $249,000. Those who do qualify could save anywhere from $300 to over $1,000 a year, depending on the loan size. But with new car prices showing no signs of dropping and tariffs still pushing costs up, any relief is likely to be modest. What Should Your Car Payment Actually Be? The general rule of thumb is to keep your total debt, including a car payment, at no more than 36% of your gross monthly income, according to CNBC. Subtract what you're already paying toward a mortgage or rent, credit cards, and student loans, and whatever's left gives you a rough ceiling for a car payment. Beyond the math, financial advisors say the real long-term play is to keep the paid-off car, bank what you were paying each month into a high-yield savings account, and let that stack build toward a down payment on the next one. Are People Souring On Brand-New Cars? People took both sides of the new-car debate in the comments on the post. "A paid off car is the best kind of car," one wrote. "$700? Some people have a $1,200 car payment lol," a second said. "It's all relative. If you make $150-200k, you aren't stressing about $700. If you're making $40-60k with $700 car payment that’s concerning," a third pointed out. "A $700/mon car payment isn't a flex. A paid off car is a flex," another added. Motor1 reached out to @thee_secretbakup for comment via TikTok direct message and comment. This post will be updated if she responds. We want your opinion! What would you like to see on Motor1.com? Take our 3 minute survey. - The Motor1.com Team
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