Summary:
Buying a new car has become increasingly challenging due to rising vehicle prices and high interest rates. A 2025 Edmunds report reveals that 19.3% of consumers financing a new car face monthly payments of $1,000 or more. This financial strain underscores the importance of avoiding common car-buying mistakes, such as overspending, opting for dealership loans, trading in cars with negative equity, and overlooking used car options.
What This Means for You:
- Stick to a budget: Keep car-related expenses under 15%-20% of your monthly income.
- Secure preapproved financing: Avoid dealership loans by getting preapproved from a bank or credit union.
- Address negative equity: Avoid rolling debt into a new car loan by keeping your current vehicle longer or refinancing.
- Consider certified pre-owned vehicles: Save thousands by avoiding the rapid depreciation of new cars.
- Utilize internet sales teams: Negotiate better deals online before visiting the dealership.
Original Post:
Buying a new car has never been more financially daunting. A 2025 analysis from Edmunds found that a record 19.3% of consumers who financed a new vehicle in the second quarter of 2025 committed to a monthly payment of $1,000 or more. That’s nearly one in five buyers taking on what was once considered an extreme car payment — driven by high interest rates and rising vehicle prices.
While it might be tempting to stretch your budget for the car you want, locking yourself into a high-cost loan can be a painful mistake. Before you sign, here are five common car-buying missteps to avoid.
1. Buying outside your means
With an average new vehicle transaction price of approximately $49,000, many buyers are stretching their budgets. Extending financing terms to 72 or 84 months might seem appealing, but it can lead to long-term financial strain. Aim for a loan term of no more than 60 months and keep car expenses under 15%-20% of your monthly income.
2. Getting a dealership loan
Dealership loans often come with higher interest rates or hidden fees. Secure a preapproved loan from your bank or credit union to negotiate from a position of strength and potentially save thousands over the loan term.
3. Trading in a car with negative equity
Trading in a car with negative equity can worsen your financial situation. If you owe more than your car’s value, consider keeping it longer or refinancing to avoid rolling debt into a new loan.
4. Not working with internet sales team first
Internet sales teams can offer better prices and faster transactions. Use online tools to compare prices and get written quotes before visiting the dealership.
5. Overlooking used car options
Certified pre-owned vehicles often come with warranties and cost significantly less than new cars. Avoiding the depreciation of new vehicles can save thousands in the long run.
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This story was provided to The Associated Press by the automotive website Edmunds. Josh Jacquot is a contributor at Edmunds.
Extra Information:
Edmunds: How Long Should My Car Loan Be? provides insights into choosing the right loan term to avoid financial strain.
Consumer Financial Protection Bureau offers tips on securing auto loans and avoiding predatory lending practices.
Edmunds: Certified Pre-Owned Vehicles highlights the benefits of purchasing certified pre-owned cars.
People Also Ask About:
- What is a good car loan term? A 60-month term balances affordability and interest costs.
- Should I finance through a dealership? No, secure a preapproved loan from a bank or credit union for better rates.
- How do I avoid negative equity? Keep your car longer or refinance to pay down the loan faster.
- Are used cars a good option? Yes, certified pre-owned vehicles offer value and warranties.
- How can I negotiate a better car price? Use internet sales teams and written quotes for leverage.
Expert Opinion:
Navigating the complexities of car financing requires careful planning and research. By avoiding common pitfalls and leveraging online tools, buyers can secure better deals and protect their financial health in an increasingly expensive market.
Key Terms:
- Car financing tips
- Avoiding negative equity
- Certified pre-owned vehicles
- Dealership loan pitfalls
- Car budget planning
- Online car negotiation strategies
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