Wealthier Americans are flexing their purchasing power, while lower and middle-income Americans are starting to pull back on spending after getting hammered by rising costs on groceries, gas, and everything else.
Driving the news: More car shoppers than ever are signing up for $1,000+ monthly payments. The share of new-car buyers committing to four-figure monthly payments hit a record 20.3% in Q4 2025, up from 19.1% in Q3 and 18.9% compared to a year earlier, according to Edmunds.
The reasons: The average amount financed for new-vehicle purchases climbed to a record high of $43,759 on the back of rising new-car transaction prices and still elevated interest rates.
On top of that, vehicle destination fees haven’t risen this fast in over a decade.
In 2025, Detroit automakers increased the destination charges (nonnegotiable fees set by the carmaker) across their pickup lineups by roughly $600, reports the Detroit Free Press.
It’s an easy way to pass along costs from President Trump's tariff policy to the consumer, and nearly every automaker is guilty of it on some level.
Between the lines: Longer loan terms continued to play a major role in managing new-car financing costs.
84-month or longer loans made up 20.8% of financed new-car purchases in Q4 2025.
While this figure was slightly down from 22% in Q3 2025, Edmunds analysts note that it remained well above the 17.9% share seen in Q4 2024.
Meaning, consumers are continuing to rely on extended loan terms as an affordability tool.
“Faced with persistently high vehicle prices and borrowing costs, many consumers were forced to adapt by financing larger amounts, stretching loan terms and, increasingly, taking on four-figure monthly payments. The record-setting figures we’re seeing reflect the financial strain many buyers faced throughout the year," said Ivan Drury, Edmunds’ director of insights.
Still, sales are expected to surpass 16 million vehicles for 2025. But looking ahead, new-vehicle SAAR of 15.8 million, driven by slower economic growth, according to Cox Automotive.
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The main culprit: Uncertainty among consumers making less than $150,000 a year.
New car sales have plunged 30% since 2019 for those earning $75,000 or less, while sales dropped 7% among families with incomes between $75,000 and $150,000, according to Cox.
Yet, new-car sales have soared 45% among households with annual incomes of $150,000 or more since 2019.
“The people who can still afford new vehicles are buying what they want: larger premium vehicles,” Cox executive analyst Erin Keating told Bloomberg. “Everyone else, they didn’t downgrade to a compact car, they left the new market entirely, buying either used or hanging onto what they’ve got.”
Yes but, 6.3% of used-vehicle buyers also committed to $1,000+ monthly payments during the quarter (a new record), compared to 6.1% in Q3 2025 and 5.4% in Q4 2024, per Edmunds.
The good news is that interest rates are coming down.
“New-vehicle prices remain high but are beginning to stabilize, lower interest rates could offer some relief for both new- and used-vehicle shoppers, and an increase in off-lease returns is expected to provide more affordable alternatives in the used market,” Drury explained.
Big picture: This split between the “haves and have-nots” isn’t new, but the financial strain is drowning some of the lowest earners to the middle class, and creating an even wider divide that some economists say could prove problematic down the line.
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