Buying a new car has never been more financially daunting than ever before. A 2025 analysis from Edmunds found that a record of 19.3% of consumers who funded new vehicles in the second quarter of 2025 committed to paying more than $1,000 a month. This is due to high interest rates and rising vehicle prices for one in five buyers once considered extreme car payments.
While it may be tempting to stretch your budget for the car you want, locking yourself up on a high-cost loan can be a painful mistake. Before signing, there are five common cars to buy.
Buy a car you really can’t afford (or shouldn’t)
There is a difference between being able to buy something and being able to afford it wisely. On average, the new vehicle transaction price is around $49,000, and many buyers are really broadening their budgets. It’s not uncommon to see buyers choose to expand 72 or 84 months of funding terms.
While that shiny SUV may seem within reach thanks to flexible funding, the long-term hit on your financial health may be substantial. Buying in your means – ideally targeting a loan term of less than 60 months and keeping your car-related expenses below 15% to 20% of your monthly take-out salary is smart shopping in an era of rising interest rates and increasing car prices.
I’m not shopping for a loan
One of the most expensive and common mistakes that car buyers make is to wait until they sit in the dealer finance office and think about the loan. Dealers may offer convenience, but their funding may include marked-up interest rates or hidden fees.
Instead, step into the dealer with a pre-approved loan offer from a bank, credit union, or online lender. The move can save hundreds to thousands of dollars over the lifespan of a loan, according to the Consumer Financial Protection Agency. Doing this will allow the dealer to beat the rate. But now you are negotiating from a position of strength, not despair.
Involve negative equity in new car loans
If a current car has more people than it is worth replacing with a new vehicle, it could turn into a financial mine. This generally happens when people get a 6-year loan, trade in vehicles only three or four years later, and carry their previous balance to a new vehicle. Rolling that deficit on a new loan will only make the problem worse and guarantee you will be underwater for longer.
According to Edmunds, 28.2% of trade in July 2025 was related to negative fairness, with the average buyer exceeding the value of the vehicle being $6,902. This sets the stage for a vicious cycle, especially when buyers trade their cars frequently or face unexpected unemployment and repair costs. If you are in this situation, consider keeping your car longer and making additional payments. If you can get a better rate, even refinance can bring you back to breakeven.
Skip in the Internet Sales Division The most major dealers have dedicated internet sales teams that exist to sell cars at a price faster and more frequently than face-to-face. If you already know what you need, the model and trim, working with the Internet sales department instead of walking through the lot will save you time, even thousands, or even thousands of dollars.
Sites like Edmunds can help you compare prices between multiple dealers. Many people view real-time inventory, rebates and incentives. This allows you to shop from the comfort of your home and let dealers compete with your business. It also provides written quotes that you can bring with you – a powerful tool when negotiating.
Overlooking used alternatives
New purchases are attractive. It smells great, is under warranty and no one else touches it. But it’s not always the smartest financial move. Today’s certified second-hand cars often have extended factory warranty, strict inspections and cost thousands of more than new counterparts. The rapid depreciation of most new vehicles only makes the photos worse. According to Edmunds, most people lose 20% to 30% of their value in the first year alone. Avoiding the depreciation blow can save thousands.
Edmunds says
Buying a new car is one of the biggest financial decisions most people make. All you need to do is buy a house. It’s not just about avoiding these five common mistakes and saving you money. It could help you ensure long-term financial security. Take your time to do your homework. The right deal isn’t just about cars – it’s about the life you want to live after driving it a lot.
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This story was provided to the Associated Press by the car website Edmunds. Josh Jacotte is a contributor to Edmunds.
