Average Monthly Car Payments In 2024

A car can be a comfortable, efficient and even fun way to get around – but it can be pricey as well. Most people likely don’t have enough money on hand to pay for a car in cash, so they end up financing their car and paying it off over time.

So if you’re going to finance a car, you should have an idea about the going rate for monthly car payments. In this article, we’ll look at the average car payment in 2024, how to determine what yours could be and ways you can find the best deal.

Average Car Payments for New and Used Cars: At A Glance

Just as the prices vary greatly between new cars and used cars, so does the average monthly payment for a loan. For any car, several factors determine the overall rate of an auto loan, including the model year, the price of the car, the interest rate of your loan and the initial down payment you pay. Keep in mind that car prices have risen dramatically for several reasons over the past few years, including inflation, supply chain complications and increased production costs.

This table spells out the factors that impact the final purchase cost of a new and used car.

Monthly Car Payments For New Cars

Many factors influence the cost of monthly car payments for new cars, such as a car’s brand, model and features. Higher-priced vehicles usually means higher monthly payments. Market conditions such as supply and demand, economic factors and production costs also play a significant role in determining car prices.

For instance, car prices usually rise during periods of high demand or limited supply, which leads to higher monthly payments. Conversely, car prices tend to decrease during economic downturns or when there is excess inventory, resulting in more affordable monthly payments. Inflation also plays a role – the higher national inflation, the more expensive cars will be.

Monthly Car Payments For Used Cars

Like many things, the cost of used cars has risen over the past 10 years: the Consumer Price Index for used cars and trucks in December 2013 was 152.5, while that same figure in December 2023 was 190.6. (It should be noted, however, this figure rose to 211.7 in December 2021.)

Regardless of national trends, the cost of a vehicle plays a direct role in the cost of a monthly car payment for a simple reason: the higher the cost, the higher the loan amount.

But when you buy a used car, you don’t have to buy it from a dealer. Financial institutions will indeed finance a car purchase when you buy it from a private seller, but they may have minimum and maximum amounts you can borrow in these cases. For that reason, it pays to research the rules on borrowing before you start your vehicle search.

Wherever you get your financing, the annual percentage rate (APR) you get will depend on your credit history and other factors, including the age of the car, as well as its mileage and condition.

What Determines Your Monthly Car Payment?

Many elements affect the average cost of a car payment per month, and they go far beyond the car you’re actually purchasing. They include:

• Credit score: Your credit score is a figure that basically tells creditors how financially responsible you are – the higher your credit score, the more reliable you’ve been at paying back previous loans. A high credit score means you’ve been responsible, so you may qualify for a lower interest rate, which leads to a lower monthly car payment. Conversely, a lower credit score likely results in a higher interest rate, increasing your monthly payment amount.
• Annual percentage rate (APR): The APR is a crucial factor in determining your monthly car payment. A lower APR typically creates a lower monthly car payment because you are paying less interest over the life of the loan. Conversely, a higher APR leads to higher monthly payments as you accrue more interest. That’s why it's critical for car shoppers to look at multiple lenders and find the lowest APR before committing to one particular seller.
• Type of car you buy and where you buy it: The type of car you buy has a dramatic effect on your monthly car payment. Higher-end luxury cars typically come with higher price tags, which typically lead to larger monthly payments. Conversely, smaller, more economical cars are cheaper, which can mean lower monthly payments. Additionally, where you buy the car, whether from a dealership or through a private sale, can affect financing options and interest rates, which impact your monthly payment.
• Loan length: The term of the car loan directly influences the monthly car payment – the longer the loan, the smaller the monthly payments. The converse is also true – shorter loan terms lead to higher monthly payments. This is because longer loan terms spread the total cost of the car over a greater number of payments, reducing the amount owed each month. However, while longer loan terms may seem more affordable on a monthly basis, they typically result in higher interest over the life of the loan, increasing the overall cost of the vehicle.

Something to remember through all of this: your monthly car payment doesn’t include car insurance or maintenance costs, so consider those factors when you create your budget for buying the car.

How To Estimate Your Monthly Car Payment

If you are setting out to buy a car, it’s prudent to be able to answer this question: How much is a car payment? In addition to knowing how much money you’ll be paying, having a handle on your monthly payment can help you budget accordingly. This knowledge is crucial to helping you manage your debt and keeping your economic house in order.

A few other key points to consider: While it may be tempting to look for a high-end luxury car, you need to keep your financial limitations in mind so you don’t finance a car above your means. Also, keep in mind that you’re going to have to pay car insurance and for any repairs that come up, which can get expensive – especially for high-end cars.

All of this is to say there are myriad factors involved in calculating your monthly car payment. There are online calculators that can help you get a ballpark estimate of your final cost, and here are some of the relevant factors to keep in mind:

• Cost of car you want to purchase
• Where you live
• Condition and age of your trade-in (if relevant)
• Amount you can pay as a down payment
• Your credit score

How To Reduce Your Monthly Car Payment

With all of these factors, there are ways you can help lower your monthly car payment. They include:

• Improve your credit score before buying: If you make efforts to improve your credit score – check your credit report to ensure your information is correct, pay your bills on time and more – you could improve your credit score over time. As a result, you could score a lower auto loan interest rate.
• Make a bigger down payment: The larger your down payment, the less you will have to finance. This means you will be borrowing less money, which usually equals lower monthly payments.
• Choose a longer loan term: If you take out a longer-term loan, you will have more time to pay off the principal. This nets out to a lower monthly payment – but keep in mind that the interest trade-off could mean you end up paying more in the long run.
• Trade in your car over its value: If you can trade in your current car for more than its value, you can take this extra value and apply it toward your down payment. This, in turn, would lower the monthly payment because you're financing a smaller amount.
• Consider leasing a car: If all these calculations seem too vexing, you could look into leasing a car rather than buying one. When you lease a car, you are essentially renting a car for a longer period. You pay a monthly fee to use the car for an agreed-upon length of time, usually a couple of years. When the lease ends, you can either return the car or buy it. If this sounds appealing, look into how much it costs to lease a car.

The Bottom Line

Whether you’re buying a used car or a new one, financing the vehicle can be a complicated process. But with a little work and some research, you can figure out ways to manage your debt and, possibly, lower your monthly car payment. An important part of this process is to have a good handle on your finances, so download the Rocket Money℠ app today to gain insights into your financial story!