That is how much the average new car loan costs, apparently. It adds up. Over six years, paying that much each month would pay off a new car that sold for about $56k, which is about what the average new car (to be precise, new crossover, SUV or truck because that’s pretty much all there is) sells for now.
How many people can afford this? Well, the median household income in the United States is currently about $87,460. That’s two earners, typically – meaning a median single earner brings home a lot less than that. But let’s go with $87,460. A household with that income would be spending about two-thirds of it on a $56k vehicle. It does not leave much for rent/mortgage/food and so on. In fact it makes it impossible – assuming the household wants to live in a house (rather than in the vehicle) and also to eat and so on. To be able to pay the rent/mortgage plus the food and so on and the monthly $787 would likely require a household income around $120,000 and that is probably cutting it close.
This is a startling figure to anyone GenX (me) or older because we can remember when a person who made six-figures plus was doing really well. They were near-rich. Now it seems they are barely middle class. It is a metric of our enserfment.
This etiolates down the line. That $56k new vehicle – after six years and come trade-in time – is now a $25k vehicle. That’s what used to buy a pretty nicely optioned new vehicle and only just a few years ago, too. Not in the halycon Before Time that only people who are GenX and older remember. Here’s an example to make the point:
In 2019 – the last before “COVID” (that is to say, the last year before they launched the “COVID” op) – a brand-new (and also all-new) Ford Ranger stickered for $25,395 to start. Fast-forward to 2026 – a mere seven years – and that same truck (brand-new, but no longer all-new) lists for $35,350. The difference then vs. now for the same truck is $7,995. Here’s how that difference works out:
If you financed the ’19 Ranger’s $25,395 it would have cost you about $340 per month for six years to pay it off. Today, it would cost you about $450 per month to finance the same Ranger. Another way to look at this is that you could have paid off the ’19 Ranger in less than five years if you paid as much each on it as it costs to pay off the ’26 in six.
Work Harder! That’s what the horse in Orwell’s Animal Farm resolves to do when the work he’s doing isn’t enough to get the job done.
The new car loan analog of this is the 84 month paayment plan. That’s seven years, chief. According to CNBC, 25.5 percent of new vehicle loans extend into that distant future – because it’s a way make those monthly payments seem more manageable. This is up from 21.8 percent a year ago, by the way – which is another metric of our enserfment.
“If you need 84 months just to make the payment fit, that’s a potential warning light that the vehicle is out of your budget,” Edmunds.com analyst Joseph Yoon said. No! Really? “Consider buying used, choosing a cheaper trim with more needs than wants, or saving longer for a higher down payment,” he advises.
Well, yeah.
Except used car prices correlate with new car prices, as mentioned already. In the halcyon Before Time of 2019, the used car value of a $25k-brand new vehicle such as the Ranger would have dipped to around $12k after six years and many people can afford to write a check for that much. Even if they can’t, they can probably afford the payment – even with the higher used car interest – because the principle is low. Today, you pay high interest on the higher-cost used vehicle that costs about as much as the new vehicle cost back in 2019.
And “cheaper trim”? They don’t make ’em anymore. Not really. Not in the sense they once did, back in the halcyon Before Time, when you could skip cost-adding options such as power everything, fancy alloy “rims,” a stereo and even AC (only us GenX and older rememberers of the halcyon Before Time remember when AC was commonly optional in “lower trim” vehicles).
CNBC says 21.2 percent of new car loans exceed $1,000 per month. Once again, this is startling to GenX’rs and older people who can remember the halcyon Before Time, when a monthly payment like that typically came with a set of keys to a Bentley or a Ferrari.
Today, it comes with the fob that starts a new Silverado pick-up.
. . .
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