$1,000 car payments are increasingly common, especially in Georgia

A $1,000 payment eats up 14% of the median household’s monthly income nationwide.

Matt Schulz, LendingTree’s chief consumer finance analyst, said the trend reflects both necessity and desire.

“A $1,000 car payment is really, really high, but many Americans are clearly willing to take them on,” Schulz said in the report.

What’s driving high car payments

Schulz, in an interview, said Georgia’s ranking comes down to a mix of factors rather than any single cause. Part of it is simply buyers with money to spend choosing to spend it.

“Some of it is certainly just kind of ego. You know, I can afford this, so I’m going to get this big truck or SUV,” Schulz said. “In states like Georgia, there’s a lot of open space, and a lot of places that you can’t get around without a vehicle, so that plays into it too.”

Credit also plays a bigger role than many buyers realize, Schulz said. Georgia tends to rank near the bottom nationally for average credit scores even though its income levels sit closer to the middle of the pack, and that gap can push monthly payments higher for buyers who don’t qualify for the best interest rates.

“If you have a low credit score and you want to buy yourself a really nice car, the rate that you get might be high enough to push that monthly payment up significantly higher than it might be for some other folks,” he said.

On the other hand, it’s also true that the better a borrower’s credit, the more likely they are to carry one of these high payments. Among people with super-prime credit scores of 720 or above nationally, 11.4% have a $1,000-plus monthly payment.

Schulz cautioned that qualifying for a large loan and being able to comfortably afford it are two different things.

“Just because someone will lend you money doesn’t mean that you should take it or that you can afford it,” he said.

Separate pricing data released this month by Kelley Blue Book showed why so many buyers are stretching their budgets in the first place. The average transaction price for a new vehicle nationwide was $49,758 in June, up less than 1% from a year earlier, as buyers increasingly gravitated toward cheaper vehicles to keep costs down. Kelley Blue Book is part of the automotive division of Cox Enterprises, which also owns The Atlanta Journal-Constitution.

Credit: Hyundai Motor America via AP

Credit: Hyundai Motor America via AP

Subcompact SUVs, with an average price around $31,000, saw sales climb more than 23% year over year, helping hold down the overall industry average even as prices in most individual segments continued to rise.

Electric vehicles told a different story. The average price paid for a new EV was $56,238 in June, down 4.5% from a year earlier and the sixth straight month of year-over-year declines.

Can’t afford your loan payments?

For Georgians already locked into a payment they can’t comfortably manage, Schulz said timing matters more than almost anything else.

“The sooner you can reach out to your lender to let them know that you’re struggling, the better,” he said, noting that lenders are far more willing to work with a borrower who flags a problem early than one who has already missed several payments. Credit counselors can also help, he said, and refinancing may be an option for borrowers with decent credit who are far enough along in their loan.

Schulz offered a few pieces of advice for buyers trying to avoid getting locked into an unaffordable loan in the first place.

Shop by total price rather than monthly payment, he said, since focusing only on the monthly number makes it easier for dealers to stretch out loan terms or bury costs elsewhere.

Be wary of extra-long loan terms too. A six- or seven-year loan may look manageable each month, but it often means paying significantly more in interest over time.

Schulz added that the underlying advice holds regardless of income level: Understand the full cost before signing anything.

“Buying less than you think you can afford is generally a pretty good piece of advice when it comes to a lot of things, but certainly with car shopping,” Schulz said. “It can be easy to kind of get starstruck a little bit by that really cool vehicle in the dealership, but you really need to make sure that you understand the reality of what you’re getting into before you sign.”