FOREVER Car Payments: The New American Standard

Added: 2026-05-18

[00:00:00]Our economy and the way that people think about and spend money has been changing so much just over the past five or six years since we had the pandemic that it has become normal now to have what's called a forever payment when it comes to your vehicle. You know, typically in the past, people would pay cash for vehicles. That was very common.

[00:00:23]And if you did have to finance a car, you might finance it for three years, maybe five years maximum. But now it's not uncommon for people to be financing cars for seven or eight years. I won't be surprised if pretty soon it's 10 years. And the president of Capital One Auto recently stepped forward and said, "Well, I'm not worried about this. I think this is okay that people are essentially having forever payments coming from somebody who profits off of this." And that's because Capital 1 Auto is the largest auto lender in the world, or at least in the United States. Wow.

[00:01:00]Speaking of autos, I just got to show this real quick. There's some amazing old classic cars here. Very cool. Just kind of stumbled upon this by accident.

[00:01:10]For all you car lovers out there, there's another old hot rod. Check that out. Now, according to Capital 1's data, they say that the average payment to income ratio has remained around 10% since before the pandemic. And now people are adapting to the higher costs by stretching out their loan terms longer and longer. And of course, that's not a problem because that means this place is always going to be perpetually collecting interest payments from people. How wonderful. This is great for business. The fact that people are going to have car payments indefinitely. Sign us up. So basically what's being said here is affordability of today's cars is being maintained by people stretching out their auto loan terms further and further. Instead of having lower vehicle prices, we can just have extended auto loan terms. And this is a very toxic mentality how affordability is being viewed in general these days in the United States. I think we are on our way for that similar scenario to play out in the housing market. Look, the only way that home builders can sell homes right now is by artificially lowering the interest rate along with a price cut along with other incentives and goodies and freebies to get people to buy those homes. Now, the median car payment in 2019 was $390.

[00:02:27]Today, it's $525.

[00:02:30]And that's a massive increase in just a few years. But they're saying, well, this isn't a problem because wages also went up during this time. So, people are still spending an okay amount of their income on their car payments compared to what they make while completely ignoring the fact that people are having to take on much longer auto loan terms just to be able to keep those payments somewhat affordable. And you know, this is all a trick, guys. You know, if you think this is a good idea to sign up for a car payment for eight years because it's the only way you can afford one, keep in mind that even though you might be saving a couple hundred a month by doing this, you end up paying thousands of dollars more in interest over the life of the loan for that vehicle. Like one example here is that if you're financing a $30,000 vehicle at a 9% APR over 84 months instead of 48 months, that would cost you an extra $3,100 throughout the life of that loan. And that's a huge hidden cost that a lot of people don't focus on because all people ever worry about is what's my monthly payment? Just like when it comes to buying a house, go to an auto dealership and the first thing that the salesman's going to ask you if you're semi-interested in buying a car is what do you want your monthly car payment to be? And then they work everything else around that. The price, the vehicle, all of it. They don't care about how much debt you're taking on or how much of a problem that's going to be for you. They just want you to be satisfied with your car payment. And it makes it way more likely that you'll sign on the dotted line. If you take a look at this chart here, you can see what I mean. When you buy a $30,000 vehicle, which is pretty much the cost of a nice average used car these days, the average cost is 25,000.

[00:04:16]So, it's not far off. And you put 12% down, 3750. You borrow 26,250 at a 9% rate, you can see how much your monthly payment changes and why people sign up for this. If you go for 84 months, you're only paying 467 a month versus 5.25. 25 if you sign up for 72 months and 731 for 48 months. And yeah, it's nice to have that lower payment, but you're getting ripped off. This is becoming how the entire American economy works now. People are no longer buying things based on price. They're buying based on the payment. And the same thing is starting to happen with buy now pay later services. You know, all of these events and experiences that people go to, Coachella, Disney, vacations, whatever, all of this stuff can be financed now. And when you combine credit cards with buy now pay later, it makes it easy for people to spend money they don't have. And now it's happening with cars. People are no longer asking, "Can I afford this car?" They're asking, "Can I make the monthly payment?" And the other problem with having a longer monthly payment like this is not just the fact that you pay way more in interest, but it also comes down to negative equity on the vehicle. By the time you actually need to get rid of this car, there's a good chance that you probably still owe money on the loan, and you're going to have to roll that balance into the new car that you want to buy. And the problem with doing that is you might not qualify first of all based on your income and you might not be able to afford the new payments because you still didn't pay off the old car. And that's where people get in trouble.

[00:06:03]According to Edmonds, they found out that 26% of used vehicle purchases now involve tradeins that have negative equity. And that's as of the April data.

[00:06:14]That means more than one out of every four used car buyers right now owes more on their old car than it's actually worth. And even worse, the average negative equity climbed to over $5,100, which is up 35% from where it was back in 2019. So, it has become status quo to dig yourself into the deepest debt hole ever just to be able to buy a car now.

[00:06:39]And then people sit there and wonder why the housing market is frozen still and no one's buying houses. Guys, this all has a lot to do with it. People need a car before they need to buy a house.

[00:06:49]That's for sure. And when this much money and this much debt is going towards just that one purchase, no one has money left over to buy houses. And actually, the stats are even worse when you look at brand new vehicle sales.

[00:07:02]According to Edmonds, they say that more than 90% of new vehicle loans right now involve negative equity and they had loan terms of at least 72 months. That's a six-year auto loan on average that people are coming in with who want to buy a brand new car. And almost everyone has negative equity. And the average negative equity that's rolled into the average brand new car purchase now is a whopping $7,100.

[00:07:29]That means that people are essentially starting a new car loan already underwater from day one. But you think Capital One Auto or your local dealership or the car salesman cares about that? Absolutely not. All they want is to sell you a car and get you into a new loan because that's what makes money. And I think what's going to happen is unless the loan terms continue to get longer and longer, which is definitely a possibility if it gets stretched to 10 years plus, that's the only way they're going to be able to keep this magic show on the road. But eventually the negative equity is going to creep so high that when people go to trade in their car for a new or used car, they won't be able to qualify for that new car payment at all because they just have too much debt from the old car and their income doesn't support that new payment because of how much old debt they're carrying from the previous vehicle. This is why it's dangerous to have a car payment, guys. Like, yeah, can you afford to have a cheap car payment of $350 or $400 a month? Most people probably can, but once you start creeping up into the higher amounts and the longer loan terms, that's where people get themselves in trouble. And even keeping the car long-term doesn't guarantee that you will actually build up equity in the vehicle either because that just means that your car is going to depreciate even more. It's going to be worth even less. So even though you're paying down your debt more, you also in a situation where the car is just not worth as much anymore either.

[00:08:55]And here's the other part of the problem. Many people are now reaching a point where the repair costs alone on the car are starting to compete with the loan payment itself. Someone might get close to paying off a car only to suddenly face a $4,000 transmission repair or an engine problem. And that creates a vicious cycle where people feel pressured to trade it in for another vehicle before the current one completely falls apart, which often means rolling negative equity into yet another long-term low. Because you might say, "Well, the solution is don't buy a new car every few years." But if you bought a used car and you have long commute times and you're putting a lot of miles on that car, well, now you're in a situation where that car is going to need some expensive repairs at some point. And the longer you have it, the more likely it is you're going to have to pay for that. You know, cars used to be something that people just bought and paid for relatively quickly. Now they're becoming long-term financial obligations, similar to having another mortgage. And guess what? The amount financed that people have to pay when they have negative equity on their previous vehicle is absolutely exploding right now. Buyers with negative equity finance an average of almost $56,000 for a new car last quarter, which is about $12,000 more than a typical new car buyer who doesn't have any negative equity. That is insane. That is absolutely insane, guys. Just think about how much money that is. 56 grand.

[00:10:26]I mean, to put into perspective, when I first started selling real estate here in Miami, one of my first sales was an allcash transaction. Somebody bought a condo, pretty decentiz condo here in Miami Beach. And um they paid I think it was about 75 $76,000 in cash for a place to live. And we're talking about people spending $56,000 for a car. And obviously that's still on the low side of things. You see a lot of brand new vehicles that easily cost 80 to 100K plus now. But these buyers who have negative equity are seeing their average monthly payments come in at $932 a month, which is an all-time high.

[00:11:08]Here's an example of how this can look.

[00:11:10]A customer recently tried to trade in a Ford F-150 Lightning, one of those electric trucks that did so well in the sales, right? That was worth $47,000.

[00:11:21]while still owing $87,000 on it. That is I just can't even imagine that. I'm sure that the dealership people once they saw all the numbers probably looked at this person like, "You're kidding, right? Like, you can't afford to buy another car. You're stuck with this one." And this is no wonder why we just saw auto loan defaults rise to an annualized 3.8% as of March, which is the highest since when? since early 2010 after we had the massive fallout from the great financial crisis. And get this, borrowers who roll their negative equity into a new car loan are more than twice as likely to lose that car to repossession within the first two years.

[00:12:02]And what else have we seen happen over this past couple years? Is the repo epidemic absolutely explode with over 5 million vehicles being repoed recently.

[00:12:14]So naturally, this has led to a situation where auto loan debt has hit a new record high b like basically every other type of debt that Americans hold nowadays. But auto loan debt reached 1.68 trillion by the end of 2025, which is a 37% increase since 2018. And just like everything else that has gone up in price, the cost of a car has just gone up too fast compared to people's incomes, guys. Like in 2018, you could buy a brand new car between $35 and $37,000. And there are still some brand new cars you can buy at that price point, but they are becoming few and far between. Right now, you're spending 50 grand for that same comparable vehicle.

[00:13:01]And that's 12 to $14,000 more in less than a decade. That's just too much.

[00:13:08]People's incomes have not gone up at that rate. There's virtually no brand new car that you can buy for under $20,000. This is why they don't want the BYD brand to make it to America because if it did, then a lot of those vehicles would be at that price point. And they are afraid that this would absolutely crush American auto sales because we just wouldn't be able to compete. And they're probably right. And you know what's the worst thing about all of this? The main reason this is actually happening is because automakers are now focusing more than ever on serving highincome buyers who are immune to price shocks and all of the volatility of the economy. So once again, everything is being built for the rich.

[00:13:51]You look around at this neighborhood I'm in here in Keystone Point. I mean, look at these houses, guys. Look at these vehicles. Brand new Beamer, brand new house. Who affords that? The rich, right? You don't have average everyday people buying this. Same thing with the cars now happening. Like literally every single segment of the economy is now being catered more and more towards the rich, which kind of makes sense because they're the ones who continuously can afford all of this nonsense regardless of what's happening. But it's leaving everybody else left behind is the main issue. There's almost no budget options left for anything anymore. Whether it's vehicles, travel experiences, groceries, a place to live, you name it.

[00:14:33]And if you do find a budget option, it is suboptimal to say the least. You are making some major tradeoffs in one way or another. Now, when it comes to food, you're making trade-offs with the quality, buying very lowquality, poorly made, processed food. And if you're buying a cheap place to live or renting a cheap place to live, there's a good chance it's in a highly undesirable area, maybe due to crime or isolation or something else. You know, you buy a cheap car, that thing's probably riddled with all kinds of issued and has, you know, 200,000 miles on it. Like, you just can't win. Proof is in the pudding because look, in 2017, automakers built 36 models of vehicles that were priced at $25,000 or less. That was basically 10 years ago and today it's only four.

[00:15:22]Four. Pretty soon it's going to be zero.

[00:15:24]More than 43% of new cars are bought by households with incomes of $150,000 or more. And that doesn't mean that those people are doing well either, guys.

[00:15:34]Because like we just previously discussed, 90% of people who are trading in a vehicle to buy one of those new cars is upside down on their loan.

[00:15:44]meaning that they owe more on that vehicle than it's worth and they're rolling that debt into the new car. So, even if you have the high income, doesn't mean everything's going great for you. There's a high probability you're just spending beyond your means like everybody else, just at a higher level. Even people who make a very low income, people who are earning 35 grand a year, have an average car payment now of about $738 a month. I mean, these people are spending basically a third of their income on just the car payment. The $1,000 car payment was an absolute jaw-dropper a few years ago when this became a thing. Now, it's becoming just common place. You had about 20% of all finance new vehicle purchases in the first quarter of this year have a $1,000 a month or more car payment. And that's up 17% from just one year ago. Imagine if you saw anything else go up 17%.

[00:16:38]Well, I guess you don't really have to imagine because basically everything that we buy and pay for is going up 17% in one year. So, you don't even have to imagine, but the car payment and the amount of people financing $1,000 a month or more, that's going up at the same clip. And remember, guys, that extra money has to come from somewhere.

[00:16:58]It's typically coming from groceries.

[00:17:01]It's coming from rent. It's coming from savings. It's coming from the emergency fund. It's coming from retirement accounts. It's coming from somewhere.

[00:17:09]Interest rates definitely aren't helping when it comes to financing cars, which is why I always recommend you don't have a car payment if at all possible. New vehicle purchases in the first quarter of this year are averaging 6.9% interest rates. People who have under a 580 credit score will pay an 18% interest rate at those buy here, pay here places.

[00:17:30]So, you're looking at a situation where somebody could be paying $14,000 in interest on a $30,000 car over a sixyear loan term. But according to the guy from Capital One, this is all okay. Nothing to worry about. Nothing to see here because as long as their share prices go up and their profits go up and they can continue to afford these yachts and mansions, then it's all good as long as you have your car payment. Just remember that, guys. when you go to sign up for that car payment, who you're really supporting. And it is still 100% possible to buy cheap vehicles out there. My buddy from Car Questions Answered, Brandon, he has a car dealership in North Carolina, and he only sells cars for cash over there for less than five grand. So, you can't sit there and tell me that those options are not available anymore because they are.

[00:18:22]It's just that people don't want to drive that. It's embarrassing, right?

[00:18:25]They don't want to have this old beater of a car because they want to look cool.

[00:18:31]They want to look like they have status and that costs money. And if it's costing you money that you don't have, well, whose fault is that? Nobody but your own. And for anybody who stuck with me this long today, I'm walking down Exora Road. I think that's how you say it. I don't know. In Keystone Point. And I think I've officially walked every street in Keystone Point now. Took me all of this season being back here in Miami to do it, but it was cool to finally walk this entire neighborhood over here. In the past, I'd only walked a few streets here and there. But I really hope that anybody who stuck with me this long really got some value out of this video and you share it with somebody who needs to hear this. And if you did enjoy it, please make sure double check that you are subscribed to my channel. A lot of times people think they're subscribed and then they realize that they're not. So, make sure that you are. And if you don't want to wait for my next video to come out, check out this one on the screen right over here.