The automotive affordability crisis is deepening as average monthly car payments reached a record $777 in the second quarter, with nearly a quarter of US car buyers taking out loans of seven years or more.

The average amount financed on a new car also reached an all-time high of $44,156 in the period, according to data released Wednesday by automotive shopping site Edmunds.com. At the same time, stretched buyers have less money to put down on a new car, as the average down payment fell 10% from a year ago to $5,815, Edmunds said.

It’s the latest sign that there’s no letup in accelerating automotive inflation as the average price of a new car in America has stubbornly remained around $50,000. To afford what was once luxury prices, more than a fifth of new car buyers signed up for monthly car payments of $1,000 or more in the second quarter, according to Edmunds. And that’s led many to owe more on their car than it’s worth and others to default on their loans.

“Affordability is such a massive hurdle that buyers are forced to stretch their budgets to the absolute limit,” said Jessica Caldwell, Edmunds’ associate vice president of insights. “When you see loan terms extending to record lengths, down payments shrinking and monthly payments hitting all-time highs, you’re looking at a clear recipe for long-term financial strain.”

With inflation at a three-year high, cost of living concerns have become a major issue in the mid-term elections this year. Beyond high sticker prices, the cost of operating a car has risen sharply this year as President Donald Trump’s war with Iran sent gas prices soaring above $4 a gallon.

That has led car buyers to make risky decisions in order to afford a new set of wheels.

“Car shoppers are caught in a dangerous practice of focusing heavily on their monthly payment while ignoring the potential long-term damage to their wallets,” said Ivan Drury, Edmunds’ director of insights. A seven-year loan at the current 7% interest rate means “you’re signing up to hand over nearly $10,000 on average in interest alone.”

Written by: Keith Naughton @Bloomberg

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