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  • Nicholas Hinrichsen

Average Monthly Car Payment: Find out Where you Stand Based on Your Income

Knowing how much the average monthly car payment serves as a good indicator of whether or not you’re paying too much. The average monthly car payment varies based on several factors. The total amount you’ll owe will depend on the car’s sale price, your down payment, loan agreement, and your credit and income. This article will help gauge how much you should expect to pay, and also provide answers to the following questions:

  • Does the condition of a vehicle affect the car payment?

  • How long is the average car loan?

  • How do car payments vary by income?

What is the average monthly car payment?


In January 2020, LendingTree noted that on average, Americans spend $550 a month for a new car loan, while used cars have an average monthly payment of $393. Individuals with a FICO score ranging from 601 to 780 could expect to pay these kinds of rates. Generally, there's an inverse correlation between credit score and how high a car payment will be -- but Experian found that individuals with credit scores between 601 to 660 had the highest average monthly payment for new vehicles at $578. Below is the table from Experian that compares credit score to average monthly payments.

Other factors that can affect how much the monthly payment will be are:

  • Size of the loan: The loan amount is how much you’re liable for paying back. This amount includes the vehicle price plus fees (tax and total interest), minus applicable down payments, and/or trade-in value. Be sure to include other additional warranty, maintenance, GAP coverage, or other add-ons to this amount.

  • Length of the loan: The shorter the loan repayment term is, the higher the monthly payment will be. Longer loan terms will result in a lower monthly payment, but keep in mind you’ll pay more in interest over the life of the loan.

  • Credit score: Credit scores indicate to lenders how much of a liability you are as a borrower. With a higher credit score, it is more likely you’ll qualify for a lower interest rate that will help bring down your monthly payment. Conversely, a lower credit score can result in higher interest rates and drive up your monthly payment.

  • Income: In addition to credit score, lenders will look at your ability to repay the loan when determining your interest rate. Having a low DTI (debt-to-income ratio) -- the percentage of your gross monthly income that goes toward debt repayment, the better your chances are of qualifying for a lower auto loan rate and monthly payment.

How many months is the average car loan?


In 2019, the average loan term for a new car was 69 months, and for used vehicles, it was 65 months. According to Autotrader, the most common loan terms are available in 12-month increments, lasting for two to eight years. When converted to a monthly measurement, the common loan terms are 24, 36, 48, 60, 72, 84, and 96 months. On average, car buyers who have a low-tier credit score (300-600) need a minimum of 82 months to pay off their car. Middle-tier credit buyers (601-660) are paying off their vehicles over the span of 75 months, while top-tier credit borrowers (661-850) are making car loan payments over an average of 64 months.


How does the average car payment vary by income?


As a general rule of thumb, it’s a smart financial move to spend less than 10% of your monthly take-home pay on your car payment. Staying below 10% will help keep costs associated (insurance, maintenance, etc) with having a vehicle below 15% to 20% of your income. Also, it will help ensure that you are making financial decisions based on affordability rather than desire.


While monthly car payments are largely based on factors previously mentioned, some of those factors can easily be manipulated so that your car purchase works with your income. Some tips to help you get the right car payment amount for your income are:

  • Pick a less expensive car

  • Pay a larger down payment

  • Contact multiple dealerships to compare car prices

  • Extend your loan repayment term

  • Decrease your DTI (debt-to-income ratio)

  • Lenders like to see that borrowers are able to have more of their monthly take-home pay go towards discretionary income (income available for use at the discretion of the user) rather than to debt repayment. Having a high DTI can hurt your chances of getting a low monthly payment.

  • Take time to improve your credit score before applying for an auto loan

Below you will find a pie chart with the categories: Amounts owed, new credit, length of credit history, types of credit used, ad payment history. The chart provides a breakdown of the weight each factor contributes to calculating a FICO score. It is shown that payment history and amounts owed have the greatest impact on your credit score. By keeping your DTI under control and staying on top of your monthly payments, you will be able to maintain a good credit score and get the best rates for an auto loan.

Refinancing with WithClutch


Did you just find out you’re drastically overpaying on your auto loan? Learn more about how you can lower your higher monthly payments using WithClutch! WithClutch can help save you money and time by allowing you to refinance from the comfort of your home in less than 20 seconds. If this is something that appeals to you, follow these simple steps to begin your refinance journey!

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