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Not too long ago, Vincent Chan left his corporate finance role to start his own gig. He says he realized that while he was earning six figures, he was tired of working 60 to 80-hour weeks helping a large company rake in it…when he could be doing the same on his own terms. Now, he creates content for those seeking “healthier and wealthier living.” Chan recently posted about the country’s #1 wealth killer: a car payment. While I’d argue that for my household, it’s daycare (IYKYK), he has a strong argument.

The average car payment in 2024 is over $700

Chan explains that a friend of his purchased a car for $55,000. When all was said and done, and payments were finished, the friend paid out a total of $70,000. However, by the time the friend owned the car, it was only worth about $25,000.

That’s a $45,000 “loss…” all in the name of driving an “impressive” vehicle.

According to multiple sources, including LendingTree, the average car payment now well-exceeds $700 a month. As such, two-car households could be averaging upwards of $1,500 a month just on car payments.

To add perspective here, my husband and I have two young children. During peak daycare expense seasons, it was about twice that two-car payment number (lol sob). Oh yes, I’m still in emotional recovery.

My point is that car payments only add to the dizzying costs of American existence for households with small children and working-parent households.

Follow the 20-4-10 rule

If you’re used to car loans, trying to avoid a car payment altogether can seem quite daunting. Chan also offers some tips for financing a car if that’s the best option for you.

Put at least 20% down. This will keep the interest rate and loan term lower.

Don’t finance for longer than four years. The longer the term, the less the car is worth at the end…and the more you’ll pay overall.

Keep overall vehicle expenses to 10% or less of your post-tax income. This includes any loan payment, insurance, and maintenance.

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Editor-in-Chief

Sarah Kennedy

Sarah Kennedy joined the MotorBiscuit team as managing editor in 2021 and brings with her a bevy of automotive expertise. She’s an ASE-Certified Automotive Service Consultant and licensed car salesperson with over a decade of shop operations experience.

Sarah was the creator of “Shop Smarts” for MOTOR Magazine and was a contributor from 2013 to 2020. Her work earned her a Gold Medalist award from the American Society of Business Publication Editors in 2014 and Bronze Medalist awards from the International Automotive Media Competition in 2014 and 2015.

She has attended the Automotive Management Institute and earned her bachelor’s degree in English from The Ohio State University.