Report: Many Americans paying up to 45% of annual income on auto loans

When it comes to automobile loans, many Americans are drowning in debt. Today, Americans carry nearly $1.7 trillion in auto loan debt—over $13,800 per household—and that figure continues to rise.

At the same time, interest rates are going up and vehicle prices have surged significantly due to inflation.

Experian, a credit reporting company, reports that in the first quarter of 2026, the overall average auto loan interest rate was 6.39% for new vehicles and 11.43% for used. The auto loan interest rate, however, is based on several factors — including income, credit history and credit score. A credit score is one of the biggest factors in determining the rate because lenders use it to gauge how likely consumers are to repay the loan.

These combined pressures have led some people to take on more debt than they can realistically afford to have transportation. WalletHub recently compared the median auto-loan debt to residents’ income across all 50 states and the District of Columbia, identifying where borrowers are stretching their finances the most.

The top three states for auto loan debt

The top three states where Americans carry the highest auto loan debt as a percentage of their income are Mississippi (45%), New Mexico (44%), and Arkansas (43%). On the other end of the spectrum, those in the District of Columbia, Massachusetts and New Jersey have much lower car loan debt relative to their income.

States with the highest average auto loan debt relative to median income are also among those with the highest auto loan delinquency rates.

Mississippi is the state where people overspend the most on vehicles. In this state, the average auto loan debt is $21,635, which is high considering the median household income in Mississippi is $48,509 per year.

By contrast, in the District of Columbia, the median auto loan debt is $17,711, while the median household income is $104,048, so consumers there are spending just over 17% of their income on auto loans.

What consumers can do

“When you become over-extended, you have to make choices on which payments to prioritize (for example, paying the mortgage versus making a car payment),” said Chip Lupo, WalletHub writer and analyst. “If you’re paying just the minimum or making late payments, there are increased costs for that.”

Lupo noted that when you have bad credit, you need to buy a less expensive vehicle, which can sometimes lead to costly repairs. In addition, fuel prices are rising in many states, which adds to the overall expense.

Researching auto ratings and reliability is always a good idea, Lupo said. In addition, making as large a down payment (ideally 20%) as you can helps because you’re paying off less debt. He suggested taking on a second job or a side hustle and dedicating the money you earn toward paying down your payments. Look at a shorter period of time to pay off your auto loan.

“Don’t fall for 0% financing. At the end of the time period, the interest will pile up,” Lupo said. “Always make at least the minimum payment and more if you can.”

The key to managing your personal finances is to make sure you have a responsible budget that includes an emergency fund in case things like unexpected car repairs are needed, he added.

In addition, at-risk Americans can improve their credit scores by paying bills on time and paying more than the minimum if possible, Lupo explained.

Between 20% and 30% of income is a good target for how much Americans should be spending toward an auto loan, he said.

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