Have you been putting off replacing a car? We have been, but we’re getting closer to the point where that’s not going to be such a good idea anymore. As I’m starting to look at car costs, there’s a lot of unhappy numbers out there, for anyone buying with cash and for anyone who is needing to finance their replacement car costs.

What kind of unhappy numbers

First, the big picture. Americans have auto debt as their third largest category of debt (after mortgages and student loans), almost 10% of consumer debt. And those loans aren’t short, typically around the 6 year mark, with ~1/3 for longer than that. The interest rates on them have been going up too. As of October 2022, the average interest rate on a car loan was almost double that of one taken out earlier in the year, at 10.6%.

And then what that means on an individual level. The average monthly payment for Americans buying new cars climbed to $748 in October, an all-time high. Now, courtesy of inflation, we regularly expect many prices to be at “all time highs”, including the stock market, but this does outpace general inflation. In 2015, an average new car payment was $483, which inflation adjusted would be $607 today; a far cry from $748. Transaction prices also went up $187 just from September to October.

What can I do?

I’m nobody’s budget police. But car salesmen are very good at convincing people to buy when they hadn’t meant to, and convincing people to buy more car than they’d planned. If you are planning to replace a vehicle, treat it like going to the grocery store.

• Look for sales (which might mean prepare to bargain)
• Make a plan so you know what to buy
• Write it down
• Bring the written list with you
• Don’t shop (emotionally) hungry
• Know what you are planning to spend.

Make sure to keep all of the above details in mind as you are figuring out your replacement car budget. And use a calculator like this one to figure out what your own scenario would be.

Need to read more about cars or driving? Make sure to check out the other posts in this category.