$50K Cars Are Becoming the New Normal—So How Are People Paying for Them?

Sticker Shock in the Showroom

The average price of a new car is rapidly approaching the $50,000 mark, the highest level ever. And, the average price of a used 3-year-old vehicle shot above $30,000 in the first quarter of 2025, about $17,000 less expensive than the price of a new car, according to Edmunds.

Inflation, rising interest rates, supply chain challenges, and tariffs, both on foreign-made cars and on component materials like steel and aluminum, are among the many factors driving up prices. In the reality of today’s auto market, how are people managing to buy cars?

The Reality of Today’s Auto Market

Cars are expensive in today’s market. In the first quarter of 2025, a 3-year-old car went for an average of $30,522, while the average cost of a new car was over $47,000.

In a market with tight inventory, car dealer markups are not uncommon. When you go to buy, you may see prices thousands of dollars above the manufacturer’s suggested retail price (MSRP).

Interest rates are also making it more expensive to buy a car. In May 2025, the average interest rate for a new car loan for someone with a credit score of 750 or higher was 11.38%. The average interest rate for a used car loan was 11.63%, according to U.S. News & World Report.

Stretching the Budget—How Buyers Are Making It Work

Buyers have to consider how to afford more expensive auto loans and monthly payments. Some consumers are opting for longer loan terms. Auto loan terms typically range from 36 to 72 months, but lenders may offer terms that stretch up to 84 or 96 months. In the first quarter of 2025, 19.8% of consumers who financed a new car opted for an 84-month loan, an all-time high, according to Edmunds.

In that same period, 17.7% of buyers were making monthly car payments of $1,000 or more. Consumers may be adjusting their budgets to make room for their car payments.

With inventory remaining tight, shoppers may be able to get a better deal by trading in a vehicle. The type of car you have and a dealer’s current inventory will influence the value of your trade-in. Some vehicles are in higher demand than others. A trade-in could reduce your upfront costs of buying a car.

Some drivers opt to lease cars or take lease buyout deals rather than buy a car upfront.

Help from Outside—Family, Co-Signers and Incentives

Younger buyers may have help from their parents when purchasing a car. Parents may offer cash to cover the down payment or monthly payments. Or a parent may serve as a co-signer on an auto loan. Having a co-signer can help car shoppers land better loan terms that result in lower monthly payments.

Consumers can also scout incentives and rebates that can make purchasing a car more affordable. Dealers may offer cash rebates or lower APR financing if you meet specific criteria. For example, active members of the military and veterans can often find discounts.

Alternative Strategies in a High-Cost Market

Buying a vehicle in a high-cost market is not as simple as picking a car you like and heading to a dealership. Buyers are having to get creative. Some alternative strategies to consider include:

• Buying used: Buying used instead of new is one of the traditional ways to save. But the gap in price between new and used vehicles is shrinking. Buyers could still potentially save by doing their research and buying used cars that have a track record of reliability and lower depreciation.
• Searching far and wide: Savvy buyers may expand their search radius to include out-of-state deals and online platforms.
• Waiting to buy: Some consumers are choosing to delay car purchases in the face of rising prices. If you opt to wait, you might focus on maintaining your current vehicle instead.
• Driving without buying: Americans in urban areas may be able to skip driving entirely, opting for public transportation and ride-share services instead. People who don’t have access to those services may consider a car subscription service. These services offer an alternative to buying or leasing a vehicle.

Creative Financing Meets Economic Reality

Driving is an essential part of life for many people. Even with car prices hitting record highs, you may need to buy a car. And you might need to get creative to afford it. You can do your research on the most affordable models. You can look for incentives and deals to bring down the price. You can explore working with a co-signer. And you may need to be flexible on the loan terms to get a manageable monthly payment.

The Bottom Line

With ongoing supply issues and the potential impact of tariffs, the auto market likely faces more challenges. Buyers will need to approach budgeting carefully and consider the total cost of their auto loans.