Almost a quarter of new-car buyers in America in Q2 signed up for a loan term of 84 months or longer, a record high that points to a growing affordability crisis in the automotive market.The average down payment on new vehicles continues to drop, and monthly payments are increasing as buyers stretch their budgets to afford a new car. While these numbers are concerning for consumers, they also raise uncomfortable questions for automakers. Financing can only go so far, and an imminent affordability ceiling could soon impact sales of new vehicles. Americans increase borrowing to afford new carsAcross multiple metrics, Edmunds data for the second quarter show a concerning increase in borrowing for new-vehicle financing.The records include 36.5% of new-vehicle purchasers taking on a 73-month or longer loan, up from 27.3% a decade ago. A further 23.9% opted for loans of 84 months or longer, another record.The average monthly car payment hit $777, the highest it has ever been, and the average amount financed for a new car reached $44,156, up from $42,388 in Q2 2025. Down payments stood at $5,815 on average, dropping from $6,433 a year ago. There’s more bad news related to zero-percent financing, with a mere 1.2% of new-car buyers securing a 0% APR loan in Q2. More Automotive:Why New Car Prices Keep Climbing (And What to Do)The U.S. may never sell 17.6 million cars againToyota’s global dominance faces new test”The Q2 data perfectly illustrates the stark reality of today’s new-vehicle market: Affordability is such a massive hurdle that buyers are forced to stretch their budgets to the absolute limit just to get into a new vehicle,” said Jessica Caldwell, Edmunds’ head of insights. “When you see loan terms extending to record lengths, down payments shrinking, and monthly payments hitting all-time highs, you’re looking at a clear recipe for long-term financial strain.”Lengthy loan terms will see many consumers spending more on interest, and depreciation means one can easily end up owing more on the vehicle than it’s worth.
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Automakers may soon need to prioritize more affordable modelsHigh vehicle prices, elevated interest rates, and limited incentives have created the perfect storm for car buyers. But carmakers may soon feel the brunt of the affordability crisis, too.In the U.S. particularly, many automakers have prioritized pricier, higher-margin SUVs and pickups, while discontinuing many of their budget models. Recently, the last sub-$20,000 new car disappeared from the market, and the sub-$25,000 category is shrinking, too.While longer loan terms have helped sustain sales, automakers can’t bet on this strategy forever. Pricing and product strategies will have to be reconsidered as the financial strain on buyers increases.Related: Ford is betting a new battery strategy will make EVs profitableIn 2026 so far, automakers like Toyota (TM), Mazda, and Honda (HMC) have seen an increase in demand for cheaper models like the Corolla, Mazda 3, and Civic. This suggests affordability — and not luxury or performance — is becoming a more prominent purchasing factor.Manufacturers like Ford that lack a budget-car lineup are also looking at ways to decrease costs.The automaker has begun production of cheaper batteries that will bring new EV prices down, and it’s also considering bringing back an affordable sedan to this market, reports Autoblog.If new-vehicle affordability continues at this rate, mass-market brands will need to look beyond high-end models to sustain momentum.Why this matters beyond the auto showroomRecord loan terms and monthly car payments don’t necessarily indicate strong demand. Rather, new cars are increasingly unaffordable for the average American, and aggressive financing is the only viable alternative.If affordability continues deteriorating, sales growth could hit a ceiling and eventually decline, pushing consumers to keep their cars longer or buy used.For automakers, hitting an affordability ceiling could mean offering bigger discounts, accepting lower margins, or bringing back cheaper, simpler cars. These options could all start chipping away at profits, hampering growth, and impacting investor sentiment.Related: GM raises stakes in battle for America’s most profitable trucks