If you've been in the market for a new vehicle in the past few years, you may have noticed the prices continue to climb.
And with those higher prices come larger auto loans.
In fact, the average auto loan has increased 57 percent over 15 years.
Jonathan Brouse, VP Consumer Lending at Mountain America Credit Union, joined us with financial guidance about managing those auto loans.
He says vehicle loans are often someone's biggest expense after housing. On average, Americans borrow $42,000 for a new vehicle and $28,000 to buy a used one. That's a big price tag, and with it comes a sizable loan. Again, on average, a typical monthly auto payment is over $750.
Most people are financing for five or six years, so the average ends up being just under six years. However, many people aren't keeping the vehicle that long. Instead, they're trading them in after three or four years.
If the trade-in value is worth more than you owe, then you can use that to pay it off. Or if you have the savings, you can pay the balance of your loan before taking out a new one.
But what many people find is their vehicle isn't worth as much as they still owe when they go to trade it in. You often hear this referred to as being "under water." For example, if you still owe $18,000 and the dealership offers you $16,000 trade-in value, you would be $2,000 under water.
You can usually still trade it in. Jonathan explained that you can roll what you owe, what is called "negative equity," into your new loan.
In fact, about one out of every four trade-ins toward a new-car purchase is under water.
If your new loan would be $43,000, but you're $2,000 under water, you would instead get a loan for $45,000 so you can pay off your original loan.
Jonathan says there are two downsides to doing that. One is, it will increase your monthly payment because you're taking out a bigger loan. The other is, if something happens to your new vehicle and it gets totaled by your insurance, they will pay you out based on the value of the vehicle, not based on what you owe for it.
And remember, a new car loses value as you drive it away from the dealership. It becomes a used vehicle at that point, which are typically worth less than a new vehicle.
Jonathan says when you finance a vehicle you can get something called GAP, which stands for Guaranteed Asset Protection. GAP can help in a few ways.
He told us about Mountain America's GAP offering.
If your vehicle is totaled or stolen, GAP may pay the difference of what insurance pays out and your loan balance up to $50,000. Plus, it can pay $3,000 toward a replacement vehicle if it's financed with Mountain America within 90 days.
Mountain America's GAP product doesn't just cover total losses. If you have a smaller claim, GAP can reimburse up to $1,000 of an insurance claim deductible.
You can get GAP for cars, trucks, boats, RVs, ATVs, travel trailers and more. There are limitations. For example, it's not available for commercial vehicles or business vehicles. There are other exclusions, as well.
If it's something you're interested in learning more about, the easiest thing to do is go into a Mountain America branch or visit macu.com/gap to see if you qualify.
Plus, for a limited time, Mountain America is offering auto loan rates as low as 4.99% APR.
Insured by NCUA
Advertised APR includes 0.25% loan rate discount with MyStyle® Checking. Actual APR based on creditworthiness.
Loans on approved credit. Membership required—based on eligibility.
This limited-time offer ends 3/31/26 and can change or be withdrawn at any time.
Vehicle must be financed at Mountain America Credit Union to be eligible for the purchase of GAP.
Terms, conditions and exclusions apply.
