Affordability has always been on car-buyers’ minds. One hundred years ago, Henry Ford was looking at how to make his company’s Model T as affordable as possible for the average buyer. Today, many consumers are asking a similar question: Can I afford to buy a car right now? The current market is challenging for buyers contending with rising inflation, economic uncertainty, and conflicts abroad.
Despite these headwinds, you don’t have to rule out affording a vehicle. We’ll take you through the current market situation, how to set a budget based on what you can afford, how to understand current interest rates, and some strategies to help guide your car search.
- What’s Happening With Car Prices Right Now?
- How Much Car Can I Afford?
- The Impact of Car Loan Interest Rates
- How to Afford a Car in This Economy
What’s Happening With Car Prices Right Now?
Car pricing is a complex interplay among current market sales rates, inventory supply, and external economic and social factors. Averages are a good starting point, but factors can vary widely from one vehicle segment to another. Right now, competition across various SUV segments is driving prices. Pickup trucks and luxury vehicles also drive up average prices and can have lower inventory levels. Other segments, like compact cars, are seeing a much more even supply and demand.
What Is the Average Price for a New Car?
| Average Listing Price* | $49,307 |
| Days’ Supply* | 76 |
| Total Inventory* | 2.89M |
*Per May 2026 data from Kelley Blue Book parent, Cox Automotive.
Average new car listing prices have been steadily climbing year over year. Days’ supply is the industry’s measure of how many days it would take at the current sales rate to move all the cars on the ground. So far in 2026, this number peaked at 96 in February and currently sits at 76. Inventory is steady, but models in very popular segments continue to face tighter supply, specifically SUVs and pickup trucks.
If you’re curious to dive into more detailed data around new car pricing, read our monthly update, When Will New Car Prices Drop?
What Is the Average Price for a Used Car?
| Average Listing Price* | $26,918 |
| Days’ Supply* | 45 |
| Total Inventory* | 2.12M |
*Per May 2026 data from Kelley Blue Book parent, Cox Automotive.
The used car market is more challenging right now. As new car prices rise, more shoppers are looking at used options, which increases competition and lowers supply. Days’ supply hasn’t budged much since last year. In May, it was up only one day year over year. Used cars are still averaging about half the cost of new ones, so if you can find an option that works for you, in your area, now may be a good time to take the plunge.
If you’re interested in more details about the current state of used car pricing, check out our monthly analysis on our sister site, Autotrader: Should You Buy a Used Car?
MORE: 1926: The Used Car Market Got a Pricing Foundation
How Much Car Can I Afford?
Determining how much car you can afford requires being very honest with yourself about your financial situation. Once you’ve taken the following steps to know your numbers, you can plug them into our KBB Car Affordability Calculator to help with some of the math.
Step One: Know your net income. This is the amount you actually take home each month after taxes and other deductions, such as retirement contributions, company-sponsored insurance, and so forth.
Step Two: Get down to the brass tacks of your monthly budget. Making a monthly budget requires figuring out how much you spend each month. Here are some of the expenses you should include:
- Entertainment (meals out, movies, cable, streaming services, and so on)
- Mortgage or rent
- Utilities (electric service, gas service, and so forth)
- Telephone and internet (landlines, smartphones, and internet service)
- Insurance (home, renter’s, auto, life, medical, and any other insurance not deducted from your paycheck)
- Loan and credit card payments
- Groceries
- Beauty, clothing, and personal care
- Gym or spa memberships
Step Three: Consider monthly auto expenses beyond the car payment: Car ownership has expenses in addition to your monthly payment. Fuel and maintenance are two major costs associated with auto ownership.
Once you’ve calculated all of these items, you should have a good idea of the monthly car payment you can afford. Try using our Total Cost of Ownership Tool to get estimates for car maintenance and more. Plug that and the other requested information into the calculator to land on a transaction price that fits your budget.
The Impact of Car Loan Interest Rates
Every car loan has several moving parts that, when combined, determine how good a deal you got on your vehicle purchase. The transaction price is the final cost of the vehicle after the down payment, trade-in, fees, taxes, and so forth. It also reflects your success in negotiating down the manufacturer’s suggested retail price (MSRP).
As car prices continue their steady upward climb, interest rates impact car buyers’ bottom lines more than ever. The Cox Automotive and Moody’s Analytics Vehicle Affordability Index shows that monthly car payments averaged $753 for vehicles purchased in May. This number is up just 0.6% year over year. Prices aren’t coming down, and for consumers, finding the lowest interest rate possible is critical to car affordability.
How Do Interest Rates Impact Vehicle Cost?
Interest rates on used car loans will almost always be higher than on loans for new cars. Using the car loan calculator, let’s make a quick comparison to see how the interest rate (the cost of the borrowed money) can impact a car’s affordability. Remember that your credit score, credit history, and job history typically all impact the interest rate you qualify for.
New Car Interest Rate
June 2026 data from Cox Automotive reports the average interest rate on a new-car loan is 9.53%. Let’s say you want to finance $30,000 for 48 months at the average rate. If you put 20% down, that works out to about $603 per month, not including tax. You would pay a total of $28,958 over the life of the loan, which includes $4,958 in interest.
For comparison, financing the same amount for 48 months at 6.0% works out to $563 per month and $27,054 over the life of the loan. Shaving those 3.53 percentage points from the interest would save $1,903 over the life of the loan.
Used Car Interest Rate
Our KBB car loan calculator shows the current average interest rate for a used car loan is 11.49%. Let’s work that out to see the payments for financing $20,000 on a used vehicle, with no down payment. The monthly payment would be $522, with a total payback of $25,041, including $5,041 in interest, over the life of a 48-month loan.
Doing the same math with a low-interest rate deal of 3% on a certified pre-owned car works out to monthly payments of $443 and a total payback of $21,249.
How to Afford a Car in This Economy
There is no tried-and-true secret to affording a car in the current economy. For some prospective car buyers, leasing a vehicle may be a better option than purchasing. Use our lease calculator to help you determine which deal is best for you. Whichever path you take, you must be willing to do the research, exercise patience, and sometimes get a little creative.
Visit our Car Affordability Information Center for curated articles and tools to help you make smart, budget-friendly decisions.
Editor’s Note: We have updated this article since its initial publication. Russ Heaps contributed to the report.
