Consumers looking to buy new cars are still facing affordability challenges, even though the average down payment has dropped to its lowest point in four years. This situation highlights a complex mix of financing strategies and ongoing economic pressures affecting the automotive market.
Edmunds data shows that the average down payment for new vehicle purchases decreased to $6,020 in the third quarter of 2025. This is down from $6,433 in the second quarter of 2025 and $6,619 in the third quarter of 2024, marking the lowest level since the fourth quarter of 2021. Despite this reduction in upfront costs, the overall affordability of new vehicles remains a major concern for many car buyers.
The percentage of consumers whose monthly payments for financed new vehicles exceeded $1,000 remained high, at 19.1% of all financed new car purchases in the third quarter. This figure is very close to the record high of 19.3% seen in the previous quarter. For used vehicles, monthly payments over $1,000 reached a new record of 6.1%, up from 5.6% in the second quarter.
Longer Loan Terms and Increased Borrowing
A significant trend showing how consumers are trying to manage monthly expenses is the increasing use of longer loan terms. More than one in five car buyers who financed their purchases chose loans with terms of seven years or more. Edmunds analysts reported that loans of 84 months or longer accounted for 22% of new car loans in the third quarter. While this is a slight decrease from 22.4% in the previous quarter, it is still higher than the 18.5% recorded in the third quarter of 2024. At the same time, car buyers are taking on larger loan amounts, with the average amount financed for new vehicle purchases rising to $42,647 in the third quarter, up from $42,388 in the second quarter of 2025 and $40,713 in the third quarter of 2024.
Interest Rate Environment and Limited Promotional Financing
High interest rates continue to be a major obstacle for potential buyers. The average annual percentage rate (APR) for new vehicle loans was 7% in the third quarter, marking the third consecutive quarter where the average has been at or above this level. The Edmunds report also indicates that promotional financing options were scarce. In the third quarter, only 3.4% of loans had a 0% APR, and 18.3% of loans had rates below 4%. In contrast, the share of loans with an APR of 4% or higher was substantial at 71.6%, with an additional 13.8% of loans having APRs of 10% or higher. This environment suggests that consumers are increasingly bearing higher borrowing costs, contributing to the ongoing affordability pressures in the new car market.
Emily Carter has over eight years of experience covering global business trends. She specializes in technology startups, market innovations, and corporate strategy, turning complex developments into clear, actionable stories for our readers.