Car shoppers are facing affordability challenges in the market for new vehicles despite average down payments dipping to nearly the lowest level in four years, according to a new report.
An analysis by Edmunds found that the average down payment for new car purchases fell to $6,020 in the third quarter of 2025. That’s the lowest level since the fourth quarter of 2021 and is down from $6,433 in the second quarter of 2025 and $6,619 in the third quarter of 2024 – but the affordability of new vehicles remains a challenge for consumers.
The share of car buyers with monthly payments exceeding $1,000 remained persistently high, accounting for 19.1% of all financed new car purchases in the third quarter, near the record of 19.3% in the prior quarter. For used vehicles, monthly payments of more than $1,000 hit a record high of 6.1%, up from 5.6% in the second quarter.
“In Q3, affordability in the new-car market remained stretched, with buyers putting less money down, financing more and relying on longer terms to keep monthly costs in check,” said Jessica Caldwell, Edmunds’ head of insights.
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“But compared to the near-new market, where inventory has been constrained by lean pandemic-era sales and reduced leasing activity, new vehicles seem to have emerged as the more compelling option,” she continued.
“With the potential for lower APRs and tariff-related price increases yet to materialize in any meaningful way, shopping for a new vehicle may have felt like the smarter play in Q3 – and could have given the new car market a modest boost,” Caldwell added.
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More than 1-in-5 car buyers who financed their purchase took out loans stretching seven years or more, with Edmunds analysts reporting that 84-month or longer loans made up 22% of new car loans in the third quarter. That’s down slightly from 22.4% in the last quarter, but is higher than the 18.5% reported in the third quarter of 2024.
Car purchasers are also taking on larger loans than they have before, with the average amount financed for new vehicle purchases rising to $42,647 in the third quarter, up from $42,388 in the second quarter of 2025 and $40,713 in the third quarter of 2024.
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High interest rates have continued to present a challenge for buyers, with the average annual percentage rate (APR) at 7% in the third quarter – which marked the third straight quarter in which the average was at or above 7%.
The Edmunds report noted that promotional financing by sellers was limited in the third quarter, with just 3.4% of loans carrying a 0% rate while 18.3% of loans carried rates under 4%. The share of loans with an APR of 4% or higher was 71.6% – while a further 13.8% of loans had an APR of 10% or higher.
Analysts noted that the Federal Reserve cutting interest rates by 25 basis points in late September occurred at the end of the quarter and therefore didn’t have a significant impact in the third quarter.
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