How Is Everyone Driving a New Car?

Everywhere I look, I see brand-new SUVs and shiny sedans rolling down the road—$40,000, $50,000, even $60,000 cars everywhere. It’s hard not to wonder: How is everyone affording this? These days, a $700-plus monthly payment seems to be the new normal. Yet for those of us who still drive a 2011 Volvo or a 2006 Honda, the math behind a new car purchase can feel… unreal.

When my partner and I went car shopping recently, we were floored by the prices. A midsize SUV—nothing extravagant—was pushing $47,000 before taxes and fees. Add the financing terms most dealers are quoting, and you’re easily north of $700 per month per car. Two new cars, and we’d be looking at $1,400–$1,600 in payments. That’s a mortgage in some parts of the country.

We’re doing fine by most measures. Between us, we bring in a combined household income of about $235,000 in Maine. We max out retirement contributions—around $5,886 each month—and still have $8,040 in take-home pay. Our monthly bills, everything from mortgage to groceries and gas, total $5,463. That leaves a $2,577 cushion for savings, repairs, travel, or just breathing room. Two new car payments would cut that buffer nearly in half. And that’s what makes me nervous.

So the question becomes: Do we need to adjust our expectations—or is everyone else living beyond their means?

The Illusion of Affordability

The automotive market today plays a psychological trick on buyers. Dealers don’t sell cars—they sell monthly payments. By stretching loan terms from the traditional 48 months to 72 or even 84 months, the price looks manageable. But that “affordable” $699 payment hides an ugly truth: you’re paying thousands more in interest, your car will likely depreciate faster than you can pay it off, and you’ll be underwater for years.

Add in the temptations—touchscreens, leather interiors, panoramic sunroofs—and suddenly you’re financing a lifestyle upgrade, not just transportation. Manufacturers know this. That’s why the average new car loan term has grown to over six years, and the average new car price in the U.S. now exceeds $48,000.

At that level, it’s easy to see how a nation that still runs on credit cards and student loans can quietly add another anchor: car debt.

The Economics of the “New Car Smell”

Let’s strip away the emotion for a minute. Buying a car is one of the largest depreciating purchases you’ll ever make. The moment you drive a new vehicle off the lot, it loses 10% of its value. Within five years, most cars lose 50–60% of their value.

If you financed that car for seven years, you’ll spend much of that time paying interest on something that’s worth less every single month. Sure, cars today are safer and more reliable than ever. But the real economic question isn’t Can I afford the payment? It’s Does this purchase align with my goals?

In our case, those goals include maxing out retirement contributions, maintaining a healthy savings rate, and keeping stress low. Trading our financial margin for something as temporary as a new car smell doesn’t feel like a win.

Lifestyle Inflation in Disguise

One of the biggest traps for middle-class professionals is lifestyle inflation—the subtle process where your expenses rise with your income. You start to feel like you’ve “earned” the nicer car, the bigger house, the more frequent vacations. After all, you’re working hard, saving responsibly, and making decent money.

But here’s the catch: wealth isn’t built on what you earn. It’s built on what you keep.

That $2,577 monthly buffer isn’t just breathing room—it’s freedom. It’s the ability to handle an unexpected medical bill, fund a side project, or take a spontaneous trip without stress. It’s the space that separates people who feel in control from people who constantly feel behind, even when their income rises.

When you exchange that freedom for a car payment, you’re not buying a vehicle—you’re renting anxiety.

Why It Feels Like Everyone Else Can Afford It

There’s a cultural illusion at play, too. On social media, everyone looks like they’re winning financially. New cars, remodeled kitchens, destination weddings—it’s easy to assume that other families have cracked some secret code to wealth. In reality, much of it is financed.

Auto loans are up. Personal debt is up. Delinquencies are quietly rising. According to the Federal Reserve, the average auto loan balance per borrower has jumped over 40% in the past decade. The average car payment has more than doubled since 2010.

So no, most people aren’t making a ton of money. Many are just taking on a ton of debt.

That’s why the smartest financial move you can make might feel boring: keep driving the car you have until it no longer makes sense to repair it. Then, when you do replace it, do it on your terms—not the bank’s.

The Rational Upgrade Path

If your current cars are reliable, paid off, and meeting your needs, there’s no urgent reason to upgrade. But if you’re starting to see mounting repair bills or safety issues, it’s fair to start planning your next move—strategically.

Here’s a simple framework:

1. Set a total vehicle budget, not a monthly payment.
   Decide the total amount you’re willing to spend. Then, if you finance, keep the loan term short—ideally 36–48 months—to avoid paying long-term interest on a rapidly depreciating asset.

2. Buy used—but not too used.
   The sweet spot for value is typically a 2- to 4-year-old car. It’s already taken the steepest depreciation hit but still has modern safety features and plenty of life left.

3. Shop for the loan before the car.
   Credit unions and local banks often offer better rates than dealers. Get pre-approved so you can walk into the dealership with real leverage.

4. Sell your old car privately.
   Dealers make money on trade-ins. You’ll almost always get more selling it yourself.

5. Think total cost of ownership.
   Gas mileage, insurance, registration, and maintenance matter as much as the sticker price. A cheaper, fuel-efficient car often wins over a pricier SUV when you zoom out.

A Mindset Shift:

From Impressing to Expressing

The ultimate question isn’t about cars at all—it’s about mindset. Are we buying things to express who we are or to impress others? The people who quietly build wealth tend to prioritize independence and options over appearances. They’d rather have a paid-off 2015 Toyota than a financed 2024 BMW.

And here’s the truth: no one’s thinking about your car as much as you think they are.

Final Thoughts:

Keep Your Payments—and Stress—Low

If you’re standing in a dealership wondering whether you’re crazy for not signing that $50,000 contract, take a breath. You’re not crazy—you’re conscious. In an age where debt is normalized, financial restraint is the new rebellion.

The soundest financial advice is simple: Buy used, borrow less, and keep your car payment low. Treat cars as tools, not trophies. The less you owe, the more control you have over your life.

A well-maintained used car won’t turn heads—but it will let you sleep better, save faster, and invest more in the things that truly move you forward.