America is facing a car debt crisis, with $1.66 trillion in auto loan debt as of the third quarter of 2025. This surpasses student loan debt and is the largest source of nonhousing debt for U.S. consumers.

Auto loan debt has grown by 58% over the past decade, fueled by escalating car ownership costs. Average new car prices have risen 30% since 2020, hitting a record $49,814 in November 2025.

Consumers respond to rising car prices by borrowing more. The typical new car loan was $42,332 with an average monthly payment of $748 and a loan term of 69 months in the third quarter of 2025.

Nearly 28.1% of trade-ins from July to September 2025 had negative equity, the highest ratio in four years. This poses a risk as auto loan assets depreciate and are often replaced frequently.

To avoid the auto loan crisis, consider buying a used car with cash, focusing on reliable brands, and seeking fair-priced auto loans from banks or fintech lenders. Shortening loan terms and exploring commuter benefits can also help reduce financial burdens.

Read more at Yahoo Finance: America’s top wealth killer just got worse. What’s driving it and how to avoid the money trap in 2026