In the last quarter of 2022, the average amount financed to buy a new car was $40,833, and the average amount financed on a used car was $30,217, according to data from Edmunds. Not everyone can afford to spend so much, though. And while the used car market has not been favorable to buyers in recent months, it is still possible to find a vehicle for under $30,000.
So, what happens if you decide to buy a $25,000 car and you can't pay for it out of your savings account so you need to get a car loan? How much would the monthly payments be that come out of your checking account? Here's what you need to know.
The monthly cost for a $25,000 vehicle
The monthly payments on a $25,000 car would be determined based on:
- How large of a down payment you make versus how much you borrow
- What rate of interest you pay for your auto loan
- How long you take to pay off your debt
Based on Edmunds data, the average interest rate at the end of 2022 was 6.5% for new cars and 10.0% for used cars. The average loan term for new cars was 69.7 months, while the average loan term for used vehicles was 70.5 months. Your own loan may look different, though.
The table below shows how much you might expect to pay, assuming you made a 5% down payment and borrowed $23,750 for your vehicle. As you will see, if you make your loan payoff term longer, your payment drops but your total borrowing costs increase, so you'll usually want to make sure you don't choose too long of a payment term to avoid increasing total vehicle costs over time.
| Loan Term | 6.5% | 8.00% | 10.00% |
|---|
| 4 Years | Monthly Payment: $563.23 Total Interest: $3,285.05 | Monthly Payment: $579.81 Total Interest: $4,080.73 | Monthly Payment: $602.36 Total Interest: $5,163.35 |
| 5 Years | Monthly Payment: $464.70 Total Interest: $4,131.76 | Monthly Payment: $481.56 Total Interest: $5,143.86 | Monthly Payment: $504.62 Total Interest: $6,527.04 |
| 6 Years | Monthly Payment: $399.24 Total Interest: $4,994.98 | Monthly Payment: $416.41 Total Interest: $6,231.84 | Monthly Payment: $439.99 Total Interest: $7,929.18 |
| 7 Years | Monthly Payment: $352.67 Total Interest: $5,874.63 | Monthly Payment: $370.17 Total Interest: $7,344.50 | Monthly Payment: $394.28 Total Interest: $9,369.36 |
Data source: Author's calculations
How can you find an affordable vehicle?
You'll typically want to ensure that your auto loan and auto insurance payments don't exceed around 10% to 15% of your monthly income. Based on this amount, a loan for a $25,000 car may or may not be affordable to you. And unfortunately, finding a cheap car can be a challenge.
If you're looking to spend $25,000 or less, some options may be to:
- Look for a private party seller -- just be sure to get the vehicle checked out carefully by a mechanic.
- Purchase a vehicle with a manual transmission, which may come at a lower cost.
- Look for car auctions in your area, especially those selling vehicles used by government agencies, as they are often well maintained.
- Be flexible about what kind of car you drive.
- Ask local dealerships about old inventory they might be more willing to haggle on.
- Consider buying a car through Costco or Sam's Club to score more savings.
By taking these steps, ideally you can find a car that's well within your price range so you'll be ready to move forward with your purchase without busting your budget.
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FAQs
Rates and terms are subject to change without notice. Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
What is the average monthly payment on 25000? ›
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| Loan Amount | Loan Term (Years) | Estimated Fixed Monthly Payment* |
|---|
| $20,000 | 5 | $415.07 |
| $25,000 | 3 | $771.81 |
| $25,000 | 5 | $514.57 |
| $30,000 | 3 | $926.18 |
13 more rowsHow much should you put down on a $25,000 car? For a $25,000 car, consider putting down at least $2,500 if it's used or at least $5,000 if it's new. By putting 10% or 20% down depending on the car's condition, you'll have the best options for loan terms and interest rates.
Is 25k expensive for a car? ›
A $25,000 car is a relatively affordable vehicle for most people, and it's well below the national average cost of a vehicle. If you're borrowing to buy a $25,000 car, you need to consider how much monthly payments will be.
How much is a $20,000 car payment for 60 months? ›
For instance, using our loan calculator, if you buy a $20,000 vehicle at 5% APR for 60 months the monthly payment would be $377.42 and you would pay $2,645.48 in interest.
How much is a $25,000 car payment for 6 years? ›
Example: A six year fixed-rate loan for a $25,000 new car, with 20% down, requires a $20,000 loan. Based on a simple interest rate of 3.4% and a loan fee of $200, this loan would have 72 monthly payments of $310.54 each and an annual percentage rate (APR) of 3.74%.
How much is a 25k loan a month? ›
The monthly payment on a $25,000 loan ranges from $342 to $2,512, depending on the APR and how long the loan lasts. For example, if you take out a $25,000 loan for one year with an APR of 36%, your monthly payment will be $2,512.
What credit score is needed for a $25,000 car loan? ›
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
Is $2,000 enough for a downpayment on a car? ›
A rule of thumb for down payments on new car loans is 20% of the purchase price, which helps you avoid owing more on the loan than the car is worth. It's best to put as little money down as possible when leasing a car.
Is it worth putting a down payment on a car? ›
Down payments reduce the amount of money you must borrow and, thus, the interest you pay while repaying your car loan. Experts recommend a down payment of at least 20 percent. Larger down payments may prevent becoming upside-down on your loan.
To determine how much car you can afford, financial experts recommend keeping your total monthly car payment at 10% or less of your gross monthly income, spending no more than 15% to 20% of your take-home pay on car expenses, and ensuring that total vehicle costs, including loan payments and insurance, don't exceed 20% ...
What are the disadvantages of a large down payment on a car? ›
Providing more money down doesn't guarantee a lower interest rate, and it can cut into your savings. Depending on the vehicle you choose to buy, 50% can be a lot of money to put down on an auto loan.
What is a reasonable car payment? ›
Financial experts recommend spending no more than about 10% to 15% of your monthly take-home pay on an auto loan payment. These percentages do not factor in total car expenses, including gas, insurance, repairs and maintenance costs.
How much is a $400 a month car payment? ›
A $16569 car is $400 per month at 7.42% APR for 4 Years.
Is $800 a month a lot for a car payment? ›
Experts say your total car expenses, including monthly payments, insurance, gas and maintenance, should be about 20 percent of your take-home monthly pay. For non-math wizards, like me – Let's say your monthly paycheck is $4,000. Then a safe estimate for car expenses is $800 per month.
Is $600 a month too much for a car? ›
How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.
How long does it take to pay off a $25,000 loan? ›
$25,000 at 20%: Your minimum payment would be $666.67 per month and it would take 437 months to pay off $25,000 at 20% interest. You would pay $41,056.85 in interest over the life of the debt.
How much is the monthly payment on a $25 000 Heloc? ›
Here are the monthly payments you can expect on HELOCs with 20-year terms (as calculated with the Mortgage Calculator): $25,000 HELOC with a 20-year term: $25,000 HELOC balance at 9.8%: $204.17 per month. $25,000 HELOC balance at 10.3%: $214.58 per month.
Can you live on a salary of 25k? ›
How To Live On $25,000 After Taxes. To live on $25,000 a year after taxes, you would have roughly $2,083 a month to pay for everything —food, rent, medical bills, other necessities and leisure activities. That doesn't leave a lot of room for error.
What would the monthly payment be on a $250,000 mortgage? ›
On a $250,000 fixed-rate mortgage with an annual percentage rate (APR) of 6%, you'd pay $1,498.88 per month for a 30-year term or $2,109.64 for a 15-year one. It's important to note that these estimates only include principal and interest.
