The average new car sold in the US in August cost $50,089 — the first month of 2026 above $50,000, according to Kelley Blue Book. The average new-car loan in the second quarter was $44,156 at 7.0% APR, with a record $777 monthly payment, and a record 23.9% of buyers signed for 84 months or longer, Edmunds reports. Almost three in ten buyers who traded a car in still owed more on it than it was worth — on average $6,884, which went straight into the next loan.
Those numbers describe one decision made under pressure: the price is high, so the term gets longer until the payment fits. This guide prices the same $50,089 car four ways — financed over 60, 72 and 84 months, and leased for 36 — and shows what each costs in interest, how long each keeps you underwater, what happens when that debt is rolled into the next car, and the specific conditions under which a lease is actually the cheaper choice. Every figure comes from a short script whose assumptions are listed at the end.
Why cars cost this muchPrices, tariffs and the payment ceiling
Average transaction price, August
- Value
- $50,089
- Context
- +1.9% on a year earlier; average sticker $51,852
Incentives, share of price
- Value
- 6.5%
- Context
- down from 7.2% a year earlier — fewer discounts
Average new-car APR, Q2
- Value
- 7.0%
- Context
- bank 60-month average 7.14%, 72-month 6.97% (Fed G.19)
Average monthly payment, Q2
- Value
- $777
- Context
- a record; 20.3% of buyers pay $1,000 or more
Loans of 84 months or longer
- Value
- 23.9%
- Context
- a record; 36.5% run 73 months or longer
Trade-ins with negative equity
- Value
- 29.6%
- Context
- average amount owed over value: $6,884
| Measure | Value | Context |
|---|---|---|
| Average transaction price, August | $50,089 | +1.9% on a year earlier; average sticker $51,852 |
| Incentives, share of price | 6.5% | down from 7.2% a year earlier — fewer discounts |
| Average new-car APR, Q2 | 7.0% | bank 60-month average 7.14%, 72-month 6.97% (Fed G.19) |
| Average monthly payment, Q2 | $777 | a record; 20.3% of buyers pay $1,000 or more |
| Loans of 84 months or longer | 23.9% | a record; 36.5% run 73 months or longer |
| Trade-ins with negative equity | 29.6% | average amount owed over value: $6,884 |
Source: CalculatorAI · calculatorai.app · Kelley Blue Book / Cox Automotive August 2026 ATP report (Sep 10, 2026); Edmunds Q2 2026 financing and negative-equity data (Jul 2026); Federal Reserve G.19 (Sep 8, 2026)
Part of the price is policy. The 25% Section 232 tariff on imported vehicles has applied since April 3, 2025, and on imported parts since May 3, 2025; the Supreme Court's February 2026 ruling struck down a different set of tariffs (those imposed under IEEPA) and left the auto tariffs in place, with vehicles from the EU, Japan and South Korea charged 15% under their trade deals. Cox Automotive estimated in March that tariffs had added $5,000–$8,900 to the price of a fully imported model and $1,600–$2,000 to one assembled in the US. The cheaper segments are rising fastest: compact cars averaged $27,997 in August (+2.9% on the year) and subcompact SUVs $31,149 (+2.2%).
60, 72 or 84 monthsThe same car, three bills
The example: a $50,089 car, 7% sales tax, $750 of fees, the Edmunds average down payment of $5,815, and 7.0% APR on every term. That leaves $48,530 to finance.
48 months
- Monthly payment
- $1,162
- Total interest
- $7,251
- Total paid
- $61,597
60 months
- Monthly payment
- $961
- Total interest
- $9,127
- Total paid
- $63,472
72 months
- Monthly payment
- $827
- Total interest
- $11,042
- Total paid
- $65,387
84 months
- Monthly payment
- $732
- Total interest
- $12,996
- Total paid
- $67,341
| Term | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 48 months | $1,162 | $7,251 | $61,597 |
| 60 months | $961 | $9,127 | $63,472 |
| 72 months | $827 | $11,042 | $65,387 |
| 84 months | $732 | $12,996 | $67,341 |
Source: CalculatorAI · calculatorai.app · drafts/car-loan-vs-lease-2026-numbers.mjs
Going from 60 to 84 months cuts the payment by $229 a month and adds $3,869 of interest — roughly $17 of extra interest for every dollar a month of relief, paid over seven years. That is the visible cost. The larger one is what the term does to the gap between what you owe and what the car is worth.
UnderwaterHow long the loan outruns the car
A new car loses value fastest in its first year, while a long loan pays down principal slowest at the start. Where those two curves cross is the month you could sell the car for more than you owe. Our model assumes the car keeps 80% of its price after one year, 60% after three and 45% after five — a typical curve for a mainstream model; trucks usually hold value better, luxury cars and many EVs worse.
60 months
- With $5,815 down
- barely, around month 12
- With $0 down
- until month 24 — up to $4,867
- Equity at 3 years, $0 down
- +$6,019
72 months
- With $5,815 down
- months 6–23 — up to $1,714
- With $0 down
- until month 35 — up to $6,721
- Equity at 3 years, $0 down
- +$46
84 months
- With $5,815 down
- months 5–38 — up to $2,890
- With $0 down
- until month 49 — up to $8,038
- Equity at 3 years, $0 down
- −$4,199
| Loan | With $5,815 down | With $0 down | Equity at 3 years, $0 down |
|---|---|---|---|
| 60 months | barely, around month 12 | until month 24 — up to $4,867 | +$6,019 |
| 72 months | months 6–23 — up to $1,714 | until month 35 — up to $6,721 | +$46 |
| 84 months | months 5–38 — up to $2,890 | until month 49 — up to $8,038 | −$4,199 |
Source: CalculatorAI · calculatorai.app · drafts/car-loan-vs-lease-2026-numbers.mjs
Two things decide whether you spend years underwater, and the term is only one of them. A down payment of about 12% keeps even the 84-month loan within $2,900 of the car's value. With nothing down, an 84-month loan is underwater for four years; if the car depreciates faster than our curve (25% in year one), that stretches to almost five. Underwater is harmless as long as you keep the car. It becomes expensive the moment something forces a sale — an accident the insurer totals, a job move, a growing family — or the moment you trade in early.
Rolling it overWhat negative equity does to the next car
Edmunds' second-quarter numbers show what happens next. Buyers who brought negative equity into a new purchase paid an average of $944 a month, against $777 for everyone else, and were on course to pay $16,270 in interest against $9,811. Their trade-ins were four years old on average.
The 84-month loan, traded in after three years
A buyer finances the $50,089 car with nothing down over 84 months: $820 a month. At month 36 they owe $4,199 more than the car is worth, and trade it for an identical new car, again over 84 months with nothing down. The old debt rides along. The new loan is $58,544, the payment rises to $884, and the second car stays underwater for almost four and a half years, at worst by $11,755. Nothing about the new car is more expensive; the buyer is still paying for the first one.
Rolling the Edmunds average of $6,884 into our $5,815-down 84-month loan instead raises the payment from $732 to $836 and the interest from $12,996 to $14,839. Every rollover makes the next one more likely, because the new loan starts deeper underwater than the old one did.
The leaseWhat $842 a month buys
A lease charges for the part of the car you use up — the drop from the price to its residual value — plus a finance charge (the money factor) and tax on the payment. Using the same $50,089 car with a $51,852 sticker, a 36-month lease with a 58% residual, a money factor of 0.0025 (6.0% APR equivalent), a $995 acquisition fee and nothing down comes to $841.56 a month, and $30,691 over three years once a $395 disposition fee is added.
That payment is higher than the 72-month loan's. A lease is not automatically the low-payment option; it is cheap only when the lessor sets a high residual or a low money factor, and those two numbers move it a lot:
Residual 52%, money factor 0.0025
- Monthly
- $926
- Three-year cost
- $33,720
Dealer marks the money factor up 0.001 (8.4% APR)
- Monthly
- $928
- Three-year cost
- $33,817
Baseline: residual 58%, money factor 0.0025
- Monthly
- $842
- Three-year cost
- $30,691
$3,000 down, baseline terms
- Monthly
- $744
- Three-year cost
- $30,192
Maker-subsidised: residual 62%, money factor 0.0015
- Monthly
- $696
- Three-year cost
- $25,465
| Lease terms | Monthly | Three-year cost |
|---|---|---|
| Residual 52%, money factor 0.0025 | $926 | $33,720 |
| Dealer marks the money factor up 0.001 (8.4% APR) | $928 | $33,817 |
| Baseline: residual 58%, money factor 0.0025 | $842 | $30,691 |
| $3,000 down, baseline terms | $744 | $30,192 |
| Maker-subsidised: residual 62%, money factor 0.0015 | $696 | $25,465 |
Source: CalculatorAI · calculatorai.app · drafts/car-loan-vs-lease-2026-numbers.mjs
The $3,000 down payment barely changes the three-year cost — it just moves money from the payments to the day you sign, and if the car is totalled in month two, it is gone. On a lease, put as little down as the contract allows.
When the lease winsThree-year swaps, not six-year ownership
The fair comparison for a lease is not "keep the car for ten years". It is the person who would replace the car every three years anyway. For them:
The lease can win — by $1,100 to $6,400
Buying on a 60-month loan and trading in at month 36 costs about $31,819 net of the car's equity. The baseline lease costs $30,691, and a maker-subsidised lease $25,465. The lease benefits from a structural advantage: most states tax only the lease payments, while a buyer pays tax on the whole price. Drive 15,000 miles a year on a 12,000-mile lease, though, and $2,250 of overage at 25 cents a mile turns the baseline lease $1,122 more expensive than buying.
Buying wins by $15,700 to $19,200
Two back-to-back leases cost about $63,165 over six years (assuming prices rise 2% a year). Buying on a 60-month loan and keeping the car six years costs $43,938 after its $19,535 resale value; on 72 months $45,853, on 84 months $47,482. Kept ten years, the bought car costs about $5,200 a year against roughly $10,200 a year of perpetual leasing.
So the lease wins when all of these hold: you would genuinely swap cars every two to four years, you drive under the mileage cap, you do not customise or damage the car, and the maker is subsidising the residual or the money factor. Leases also move the risk of the car's resale value — the thing that sank the 2022 buyers now trading in underwater — onto the lessor. Buying wins for everyone who keeps a car past the end of its loan, and by more the longer they keep it.
Before you signA checklist that works for either choice
Decide the price before the payment
At 7% with $5,815 down, $777 a month buys a $41,400 car over 60 months, $47,300 over 72 and $52,800 over 84. Shopping by payment is how the term stretches; shop by price and let the payment follow.
Get a rate before the dealership does
A pre-approval from a bank or credit union is the number to beat. Your credit score moves the rate far more than any Fed decision — see what moves it before you apply.
Ask for the money factor and residual
On a lease, write both down and multiply the money factor by 2,400 to get an APR. A money factor above the lender's base rate is dealer markup, and it is negotiable.
Price the negative equity separately
If the trade-in is underwater, get the payoff figure and the trade-in offer in writing. Rolled-in debt disappears into the amount financed unless you ask for it as its own line.
Pick the shortest term you can carry
Every month you shorten the loan reduces both the interest and the time spent underwater. If 84 months is the only term that fits, the car is probably too expensive for the budget.
Buy gap insurance if you finance with little down
If an underwater car is totalled, the insurer pays its value, not your balance. Gap cover pays the difference; many leases include it — check the contract.
The Car Loan Calculator runs the first half of this page for your own numbers: price, down payment, trade-in, rebate, sales tax, fees, APR and term, with the amount financed, payment, total interest and what an extra monthly payment saves. It has no field for negative equity, so add a rolled-in balance to the fees line — that is where it ends up on the contract. The Auto Lease Calculator takes the MSRP, selling price, residual percentage, APR (it converts to the money factor for you), down payment, fees and tax, and breaks the payment into depreciation, finance charge and tax. Once you have the loan, the Debt Payoff Tracker holds it as an auto loan beside your other debts, with a payoff date that moves when you pay extra.
The rate on either depends mostly on the borrower: the Fed's September hike added about $4 a month to a new car loan, while the difference between credit tiers is several percentage points — what moves your credit score is the better use of the month before you apply. The same lease-versus-own arithmetic, on a smaller object, is in our iPhone 18 Pro comparison; and if a car payment is squeezing the rest of the month, the 50/30/20 budget is where to see by how much.
Where these numbers come from
Market figures: Kelley Blue Book / Cox Automotive August 2026 average transaction price report, published September 10, 2026 ($50,089 ATP, $51,852 average MSRP, incentives 6.5% of ATP, segment prices); Edmunds Q2 2026 financing data, July 1, 2026 (7.0% average APR, $44,156 financed, $777 payment, $5,815 down, 23.9% at 84+ months, 36.5% at 73+ months, 20.3% at $1,000+); Edmunds Q2 2026 negative-equity report, July 16, 2026 (29.6% of trade-ins, $6,884 average, $944 payment, $16,270 vs $9,811 projected interest, four-year-old trade-ins); Federal Reserve G.19 consumer credit release of September 8, 2026 (commercial-bank new-car rates for Q2 2026). Tariff dates and scope from coverage of the February 20, 2026 Supreme Court ruling and SEMA's September 2026 tariff update; the per-vehicle tariff estimate is Cox Automotive's, as reported in March 2026. All sources read on September 29, 2026.
All calculations are in drafts/car-loan-vs-lease-2026-numbers.mjs and use the same formulas as the two calculators linked above. Assumptions, and which way they lean: a flat 7.0% APR on every term (many lenders charge more for 72 and 84 months, which would make the long loans more expensive than shown); 7% sales tax and $750 of fees (both vary by state); a depreciation curve of 80% of price after one year, 69% after two, 60% after three, 52% after four, 45% after five and 39% after six, with a faster 75%-first-year curve as a check — actual resale values vary widely by model. Lease terms are illustrative, not quoted from any lender: 58% residual, money factor 0.0025, $995 acquisition fee, $395 disposition fee, 12,000 miles a year and 25 cents per excess mile; the first payment is counted inside the 36. The six-year comparison assumes car prices rise 2% a year and ignores what the down payment could have earned elsewhere, which slightly flatters buying. Insurance, maintenance and registration are left out of every route; lease insurance requirements are often higher.
Frequently asked questions
Is it better to lease or buy a car in 2026? Buy if you will keep the car past the end of the loan: over six years, buying costs about $15,700–$19,200 less than two consecutive leases on our $50,089 example. Lease if you replace your car every two to four years, drive under the mileage limit and can get a maker-subsidised residual or money factor; then a lease can be $1,100–$6,400 cheaper than buying and trading in at three years.
Is an 84-month car loan a bad idea? It is expensive rather than forbidden. On $48,530 at 7%, it saves $229 a month against a 60-month loan but costs $3,869 more in interest, and with nothing down it keeps you owing more than the car is worth for about four years. It works only if you plan to keep the car well past seven years.
What does it mean to be underwater on a car loan? You owe more than the car would sell for. It is common in the first years of a long loan because the car loses value faster than the balance falls. It costs nothing while you keep the car, but a trade-in rolls the difference into the next loan — on average $6,884 in the second quarter of 2026.
How do I get out of negative equity on a car? Keep the car and keep paying, ideally a little extra each month; every payment closes the gap. If you must replace it, pay the difference in cash rather than rolling it over, choose a cheaper car, and avoid a long term on the new loan. Gap insurance protects you if the car is totalled meanwhile.
How much is the average car payment in 2026? Edmunds put the average new-car payment at $777 a month in the second quarter of 2026, a record, with the average loan at $44,156 and 7.0% APR. One in five new-car buyers paid $1,000 a month or more.
