How Much Would the Monthly Payments Be on a $25,000 Car?

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.

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.