How much car can you afford?

Editor’s note: This article first appeared in Money Matters, a newsletter from Britannica Money, on June 14, 2026.

Open full sized image

 The rise of the $1,000 car payment.

© Molotrax, KT Studio/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

Few questions are as powerful in personal finance as “What monthly payment can you afford?” It’s a useful question, but it can also be a dangerous one. Stretch the loan long enough, and almost anything starts to look affordable.

The latest data from the auto market paint a troubling picture. Vehicle sales fell for an eighth straight month in April—not a great trend—but it’s the financing trends that caught my eye. About 1 in 5 financed new vehicles now carries a monthly payment above $1,000, and more than 35% of new-car buyers are financing their purchases for more than six years. Plus, roughly 5% of auto loans are now 90 days or more delinquent, near levels not seen since the aftermath of the 2007–08 financial crisis.

Taken together, these trends suggest that many Americans aren’t buying cars—they’re buying payments. And sometimes those payments are unsustainable. In other words, financing something and affording it aren’t always the same thing.

My dad spent his entire career in sales, mostly dealing in big-ticket consumer goods like furniture and appliances. He understood that when people make big purchases, they rarely think first about the sticker price. They think about the payment. If a monthly payment fits the budget, the purchase feels affordable—even if the total cost is far higher than they would’ve otherwise accepted.

And that’s not necessarily a trick. For most of us, monthly cash flow is a real constraint. Housing, utilities, groceries, child care, and the other line items on your monthly budget don’t care what the sticker price was on your new car; it’s the payment that tells you whether it fits into the reality of your life right now.

The problem is that a payment answers only one question. It tells you what something costs this month, but not what it will cost over the life of the loan. It doesn’t account for depreciation, interest expense, maintenance, changing technology, or the possibility that your needs—and budget—might look very different a few years from now.

When our kids were 5 and 2, we bought a brand-new Toyota Sienna minivan, and we knew then that it would be the car that shuttled them through childhood, into dorm rooms, and then apartments. Because we knew we would be spending a big chunk of our lives in it, we splurged on every option we could justify—including a then-state-of-the-art VHS entertainment system with a flip-down screen. But within months, DVDs had become the standard. We got by with VHS for a while, but eventually adapted by plugging a portable DVD player into the van’s A/V inputs. In the end, we drove that Sienna for 18 years and 180,000 miles.

The lesson isn’t that we should have leased the van or skipped the option package. It’s that the future has a way of surprising us. Technology changes. Family needs change. Jobs, commutes, insurance costs, and household budgets change. A vehicle can remain useful through all those transitions, but an 84-month auto loan leaves less room to adapt when life doesn’t unfold exactly as planned. That’s why one of my core rules is to avoid financing depreciating assets unless I absolutely have to—and if I do, to pay them off as quickly as is practical. The sooner the debt is gone, the more flexibility you have when the unexpected arrives.

Granted, the Sienna purchase was well-timed. We were just coming out of the dot-com recession, and automakers were offering steep discounts and 0% interest. Over the years, we’ve bought used vehicles with cash and financed a few new cars, but we’ve never stretched to buy a car. Our family’s philosophy is that a vehicle is transportation first and a lifestyle choice second.

If you meticulously track your budget, you know whether a vehicle fits into your monthly spending plan. But that doesn’t mean it fits into your financial plan.

A reliable vehicle gets you where you need to go. A good financial decision should do the same. The next time you’re evaluating a major purchase, don’t stop at the monthly payment. Consider where the debt will leave you a few years from now—and whether it’s helping you reach your destination or merely making the trip more expensive.