By Chris Isidore, CNN
(CNN) — Melissa Dickerson never imagined she would end up with a $1,100 monthly car payment, especially for a used car. Then her son wrecked her Acura.
Fortunately, he was OK. But when she went shopping for a replacement SUV, Dickerson, a paralegal from Orting, Washington, soon discovered it was going to cost her far more than the $400 a month she had been paying.
“It was quite a shock,” said Dickerson, who also had to extend the loan to 72 months, or six years. “When I heard my interest rate was going to be 15%, I almost crapped my pants.”
The high monthly car payments — coupled with other changes in her household budget, including higher rent — caused Dickerson to fall deep into debt.
“Now I’m relying on the credit cards to live, to pay for things that I can’t pay now,” she said. “Food and stuff you need — the electric bill, phone bill. You think you’ll be able to pay them off next month and then you can’t.”
Record-high car prices coupled with high interest rates are leading to huge monthly car payments for many Americans. A record share of Americans — more than 20% — agreed to pay more than $1,000 per month for a new car loan at the end of the year, according to car sales site Edmunds.
High monthly car payments are putting tremendous stress on household budgets already struggling to deal with a higher cost of living. But many Americans need a car for everyday use, like commuting to work and grocery shopping.
“Regardless of economic conditions like inflation, if somebody needs a car they’re going to go out and get a car,” said Satyan Merchant, leader of TransUnion’s automotive and mortgage business. “They’re going to spend so the payments are going to stay elevated.”
The average used car loan payment is $538 a month, according to TransUnion, which nearly equals the average payment on a new car in 2019. Meanwhile, the average new car payment has increased by $300, or more than 35%, since then to $769.
Ravi Stephens II paid $80,000 in 2022 for a Ram 2500 pickup, which he planned to use in a business he was starting.
The $1,019-a-month, seven-year loan he took out was more than double his previous car loan for a 2013 Camero. It didn’t cause him too much trouble at first.
“I was confident that I could handle the loan, but unfortunately things took a turn,” said Stephens, who lives in Aurora, Colorado. “Maybe about a year ago, it started to be a bit more of a burden. So I was having to come up with a bit more money outside my job in order to sustain it. As you know, the last few years have been tough for a lot of Americans.”
Dickerson and Stephens are both current on their car loans and working with National Debt Relief to reduce their credit card balances. Typically, car loans are the last thing that Americans are late to pay out of fear their vehicle could be repossessed.
But as costs rise across the board, a record percentage of borrowers are falling behind on payments.
Car loans falling 60 days or more delinquent hit 1.45% in the third quarter, according to TransUnion. That may not sound like much, but it’s nearly 40% higher than just three years ago.
Experts say there’s little chance payments will fall any time soon.
Average car prices, currently around $50,000, will likely stay elevated. Automakers are dealing with rising costs from tariffs on imported cars and parts, as well as the cutting of production on cheaper models.
Interest rates, which affect the rate on auto loans, are starting to come down. The Federal Reserve has lowered its benchmark interest rate by nearly two percentage points since late 2024.
But the average car loan rate is not declining nearly as fast. The overall rate in the third quarter was down only about a half a percentage point from its peak of 6.56% two years prior. Used car loans h