Last summer, auto loan rejections were cut in half, falling from 42% in February to just 15% by June. Credit became easier to access, yet for many Americans, affording a car didn’t get easier — it just got longer.
Auto loan terms continue to stretch as buyers trade time for monthly payment relief. That shift helps explain why auto debt is quietly becoming one of the more stressful lines in the household budget. Inflation has cooled and lending has loosened, but car prices remain high, and the financing decisions made over the past few years are still shaping household cash flow.
On the surface, balances don’t look dramatically different by generation. Millennials and Gen Xers hold the largest average auto loan balances, both around $22,500, with baby boomers not far behind. Even Gen Z borrowers average just over $20,000. The real story isn’t how much people borrow — it’s how they’re structuring that debt.
Longer auto loans are now the norm rather than the exception. More than half of Gen X borrowers have loan terms longer than 72 months, and a meaningful share of millennials are stretching past 80 months. The logic is understandable: longer terms soften the monthly hit. But they also lock households into payments long after the initial affordability problem should have passed. Interest rates compound the issue, with Gen Z borrowers facing the highest rates, averaging around 13%, reflecting thinner credit histories and lower incomes.
Despite those longer terms, monthly payments are still uncomfortably high. Nearly 1 in 10 Gen X borrowers pays $1,000 or more per month for their car, a figure that edges closer to housing costs than many people expect. When transportation starts competing with shelter in the budget, that’s never a good sign.
For advisors, auto loans can be a great starting point when meeting with clients as large or extended car payments often signal cash-flow strain. In addition, buying a used vehicle can make a big difference for budgets, freeing up cash to put into savings or investments.
Auto loans rarely drive the planning conversation, but they’re increasingly shaping it. A simple question about car payments can open a much larger discussion about resilience, priorities, and what “affordable” really means in today’s economy.
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