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Although the average transaction price (ATP) of a new vehicle declined from December, $49,191 was still the highest level ever for January, according to the data. kelly blue book. And ATP isn’t the only thing that has increased.
one in Youtube videoFinancial influencer Humphrey Yang explained how the length of car payments has quietly doubled since the 1960s, calling it the most dangerous financial trap in America.
Is he right? Here’s what the experts have to say.
Also see Four Ways to Avoid a $1,000 Per Month Car Payment.
car payments are increasing
Citing Federal Reserve data, Yang reported that in 1963 most car loan terms at commercial banks were between 31 and 36 months. Today, the average American car loan term is around 69 months – more than double the term of most loans in the 1960s.
according to edmondsThe average monthly payment on a new vehicle purchase financed in the fourth quarter of 2025 was $772, an all-time high. Additionally, more than 1 in 5 new car buyers are committed to monthly payments of $1,000 or more.
Yang blamed three major forces: wage stagnation versus car price inflation, longer loans being more profitable and longer loans leading to more expensive cars.
Extending a car loan reduces monthly payments, but it also means car buyers pay more in interest. The likelihood of missing a payment or becoming underwater on a car loan increases, and it also gives the dealership the opportunity to sell a more expensive car while staying within the car buyer’s monthly budget.
Are car payments the most dangerous financial trap?
“People stretch out the loan term to be able to buy a more expensive vehicle. So there are lower payments, but you’re paying more interest,” explains debt and bankruptcy attorney Ashley Morgan. Ashley F. Morgan Law PC In Northern Virginia. “Most people don’t worry about the outright price; they worry about your monthly payment.”
And there are plenty of people who put in very little or nothing, Morgan pointed out. This means you have little or no equity when you buy the car, and it may also mean that the car is depreciating faster than the loan can be repaid.
“Sometimes on these longer loans, people have negative equity in their cars at times,” Morgan said. “I’ve seen people owe $50,000 on a car that’s only worth $25,000 because of the prior trade-in and the current payment terms of the loan.”
Without a car loan, you potentially have more money in your budget to save and grow your property.
“I advise people that after you finish paying off a car loan, you want to continue paying that car loan off as savings every month,” she explained. “This savings tip helps you save for a future vehicle and possibly get you a good down payment or even pay cash for your next vehicle.”