Unaffordable: 6 Signs Your Car Payment Is Too High
In the United States, the average monthly car payment for a new car is $742. Used cars still run around $525 per month. Those figures are mind-blowing, and for many people, it’s just not feasible to fit a car payment that size into their budget. If your car payment is beginning to have an impact on other areas of your life, it may be time to rethink your vehicle choice. Here are six warning signs that your car payment is too high.
1. You’re Spending More Than 10-15% of Your Take-Home Pay
Experts recommend keeping your car expenses—including payment, insurance, and gas—below 15% of your monthly net income. If your car payment alone exceeds that percentage, you’re already operating in dangerous territory. For example, if you bring home $3,000 per month, your total car expenses should ideally stay under $450. Spending more than that puts stress on your budget and limits your ability to save. If your car payment is too high, you’ll start to feel the squeeze in every other part of your financial life.
2. You Can’t Cover Other Monthly Bills
If making your car payment means you’re skipping credit card payments, groceries, or rent, something’s got to give. A vehicle shouldn’t take priority over essential living expenses like food or housing. Falling behind on bills to stay current on your auto loan can lead to mounting debt and credit damage. When your car costs force you to juggle financial responsibilities, it’s a clear red flag. Simply put, if your car payment is too high, it’s not sustainable in the long run.
3. You’re Relying on Credit Cards to Get By
Are you swiping your card for gas or groceries because your car loan takes a huge chunk of your paycheck? That’s a slippery slope. Using credit cards to fill financial gaps creates a cycle of debt that’s hard to escape. Interest charges on revolving balances only make matters worse, especially when paired with a steep auto payment. When your car payment is too high, it’s easy to get stuck in a dangerous game of robbing Peter to pay Paul.
4. You Have No Room to Save or Invest
Savings isn’t just a luxury—it’s a lifeline for emergencies, retirement, and future goals. If your car payment is crowding out your ability to build a cushion, that’s a serious issue. Without any money left over for a rainy day, even a small setback like a medical bill or flat tire can throw your whole month into chaos. Investing for your future becomes impossible when your car eats your present. If your car payment is too high, it’s robbing you of more than just cash—it’s stealing peace of mind.
5. You’re Stuck in a Long-Term Loan
Car loans longer than five years might lower your monthly payment—but they cost more in the long run and trap you in ongoing debt. If your loan term is 72 or even 84 months, you’re paying more interest over time and risking negative equity. You may end up owing more than the car is worth, making it harder to sell or refinance. Long loan terms are a sign that the car wasn’t affordable in the first place. When your car payment is too high and stretches on for years, you lose financial flexibility.
6. You Worry About Repossession
When anxiety about missing a payment or losing your car is a constant stressor, the situation is past uncomfortable—it’s urgent. Repossession can damage your credit for years and make future loans harder to get or more expensive. If you’re often choosing between paying the car note and another necessity, you’re walking a financial tightrope. Your transportation shouldn’t be a source of fear. If your car payment is too high and pushing you toward default, it’s time to explore other options fast.
Smart Cars Shouldn’t Come with Dumb Financial Decisions
When it’s all said and done, you should look at your car as a tool. It should be there to get you to and from work, and anywhere else you’d like to go. If your car payment is making you feel financially stretched or emotionally drained, it might be time to trade it in for something more affordable. Or you can consider refinancing to make your monthly payments more manageable. Ultimately, when your car fits into your budget, it will allow you to fully enjoy your life.
Have you ever realized your car payment was too high? How did you fix the situation—or are you still trying? Share your experience in the comments and let’s talk real solutions.
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Drew Blankenship is a former Porsche technician who writes and develops content full-time. He lives in North Carolina, where he enjoys spending time with his wife and two children. While Drew no longer gets his hands dirty modifying Porsches, he still loves motorsport and avidly watches Formula 1.