New Ford vehicles for sale at a Ford dealership in Thousand Oaks, California. (Photographer: Jill Connelly/Bloomberg via Getty Images)
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.
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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.
