The car is the whole list#
The average new car payment in the US hit $770 a month in the first quarter of 2026, an all-time high. Used runs $531. The average new loan is $43,925 at 6.39%, and used borrowers are paying 11.43%.
Then there’s the tell that the market knows this is unaffordable: 35.55% of new vehicle loans now run longer than six years, up from 30.83% a year earlier. Terms don’t stretch because people want to be in debt longer. They stretch because it’s the only way to get the monthly number down to something that can be said out loud.
Run $770 a month forward instead. At the market’s long-run average of about 10%, that’s comfortably over $1.7 million across 30 years. Even at a more conservative 8% it clears $1.1 million. That is the entire retirement, sitting in a driveway, depreciating.
The mechanism that makes this happen is worth naming because it’s the same every time. A dealer doesn’t ask what you want to pay for the car. They ask what you can afford per month — and then solve for it by lengthening the term. You end up negotiating a payment while they set the price.
Two things break it. Buy used, where the first owner has already absorbed the steepest depreciation, and the same vehicle often costs around half. And decide the total price before you walk in, not the payment.
The other seven, in proportion#
They’re real. They’re just not the same order of magnitude.
Extended warranties. Mostly profit for the retailer, which is why the push is so hard on low-margin electronics. The manufacturer typically covers the first couple of years anyway, so a “three-year” warranty often buys one extra year of coverage you’ll forget you have. Many credit cards extend warranties free — use one, pay it off monthly, and stop there.
Penny stocks. The average annual return here gets quoted at about –30%, and the mechanics explain it. A company under $300M in market cap has so little liquidity that a handful of large sells can collapse the price. Tesla above a trillion barely twitches. Thin markets are easy to manipulate and you’re not the one doing the manipulating.
Eating out. The average US household spends over $3,000 a year on it, before alcohol. The money matters less than the second-order effect: the drinking attached to it costs you the following morning too.
Expensive gifts. Nobody in their twenties expects luxury, friend groups turn over, and every large gift comes out of the years when compounding has the most runway.
Hotels. Travel is worth it. Hotels are where the budget dies. Stay with people, get creative on domestic trips.
Passion purchases. This is the one where the standard advice overreaches. You don’t have to choose between a hobby and a future. Cap it at around 5% of take-home pay and stop feeling bad about it. If the hobby can be made to fund itself — repairing and reselling rather than buying new — better still.
Subscriptions. Something like $34 billion a year goes to subscriptions people don’t use. Note the test isn’t “cancel everything.” It’s whether you’re using it and whether it displaces something pricier. A streaming service that replaces a weekly cinema trip is doing real work.
The reframe that does the most#
The line worth keeping from all of this: just because it’s in your bank account doesn’t mean you can afford it.
Affordability isn’t whether the transaction clears. It’s whether it clears while you’re still investing at the rate you intended. If a purchase quietly displaces the monthly contribution, you didn’t afford it, you deferred it — and the deferral is being paid by a version of you thirty years out who has no say.
That framing handles every item on the list without needing a rule for each.
Where I’d push back on the genre#
Two honest corrections.
First, these lists are calibrated to a moment and go stale. The figures underneath this one have moved a lot — the commonly cited “$500 to $600” average car payment is now well behind reality at $770. Directionally the advice held; the numbers understated the case by about a third. Check the current figure before you build a plan on a remembered one.
Second, and more important: cutting is the smaller half. There’s a hard floor on savings — you can only cut to zero — and no ceiling on income. Eight items of restraint might free up a few hundred a month. One skill that raises your rate can beat all of it and keep going. The frugality content dominates because it’s easier to make and easier to act on, not because it’s where the money is.
Do both. Just don’t mistake the smaller lever for the whole machine.
So what to actually do#
- Look up your actual car payment against the $770 average, then run the same figure at 10% for 30 years. Do it once; it’s hard to unsee.
- Decide the total price before you visit a dealer and refuse to discuss monthly payments.
- Decline the extended warranty, and check whether your credit card already covers it.
- Set the hobby budget at 5% of take-home and spend it without guilt.
- Audit subscriptions once a quarter on the “am I using this” test, not on principle.
- Then go and raise your income, because that’s the side with no ceiling.
Sources & further reading#
- Average Car Payment in 2026 — Experian — the $770 new / $531 used monthly averages and the $43,925 average new loan.
- New Experian Automotive report: nearly one-third of loan terms are longer than six years — the 35.55% figure for new-vehicle terms beyond six years.
- Average car payments in 2026 — Bankrate — the 6.39% new / 11.43% used average interest rates.
- Average new car payment reaches all-time high — Fox Business — context on affordability pressure driving longer terms.
