Drivers overspend on car loans in at least 10 states
Car buyers across the U.S. are taking on more auto debt than they can realistically afford.
Between rising car prices and longer loan terms, drivers in some states are now putting nearly half of their income toward vehicle payments…and the pressure is hitting household budgets hard.
A new analysis of car loans shows that in at least 10 states, buyers are spending over 38% of their median income just on vehicle payments
Mississippi tops the list, with average auto loan debt equal to more than 44% of what residents typically earn in a year. Shewie…
New Mexico, Arkansas, Louisiana, and Oklahoma round out the top five.
Texas, West Virginia, Alabama, Nevada, and Florida also rank high, where many borrowers are feeling the pinch despite those states’ large car markets.
At the other end, places like Massachusetts, Connecticut, and the District of Columbia appear to be managing their auto debts far more carefully. In D.C., for example, drivers devote only 18% of their income to car loans.
WalletHub, the personal finance site behind the report, says this growing gap has a lot to do with regional differences in wages and vehicle costs. In lower-income states, even modest car purchases can lead to outsized debt. Combine that with rising interest rates, and it’s easy to see how buyers end up in financial hot water.
Here’s the full list of car loan debt-to-income ratios by U.S. state:
| Rank (high to low debt-to-income) | State | Median Auto-Loan Debt | Income | Debt-to-Income Ratio |
|---|---|---|---|---|
| 1 | Mississippi | $20,816 | $46,865 | 44% |
| 2 | New Mexico | $22,459 | $51,947 | 43% |
| 3 | Arkansas | $20,661 | $48,461 | 43% |
| 4 | Louisiana | $21,962 | $52,784 | 42% |
| 5 | Oklahoma | $20,728 | $50,211 | 41% |
| 6 | Texas | $23,079 | $57,162 | 40% |
| 7 | West Virginia | $20,449 | $50,861 | 40% |
| 8 | Alabama | $20,585 | $51,758 | 40% |
| 9 | Nevada | $21,038 | $53,939 | 39% |
| 10 | Florida | $20,123 | $51,945 | 39% |
| 11 | Tennessee | $20,069 | $52,606 | 38% |
| 12 | Georgia | $20,866 | $55,555 | 38% |
| 13 | South Carolina | $19,131 | $52,365 | 37% |
| 14 | Arizona | $20,651 | $56,746 | 36% |
| 15 | Wyoming | $21,080 | $58,209 | 36% |
| 16 | Idaho | $19,086 | $53,315 | 36% |
| 17 | North Carolina | $19,351 | $54,300 | 36% |
| 18 | Kentucky | $18,407 | $52,157 | 35% |
| 19 | Montana | $18,489 | $53,683 | 34% |
| 20 | South Dakota | $18,077 | $53,458 | 34% |
| 21 | Kansas | $18,448 | $55,104 | 33% |
| 22 | Missouri | $18,202 | $54,497 | 33% |
| 23 | North Dakota | $19,417 | $58,773 | 33% |
| 24 | Alaska | $21,984 | $67,183 | 33% |
| 25 | Indiana | $17,614 | $54,897 | 32% |
| 26 | Iowa | $17,924 | $56,791 | 32% |
| 27 | Hawaii | $19,304 | $61,183 | 32% |
| 28 | Nebraska | $17,545 | $56,554 | 31% |
| 29 | Maine | $17,238 | $57,088 | 30% |
| 30 | Delaware | $18,275 | $61,080 | 30% |
| 31 | Utah | $17,910 | $60,385 | 30% |
| 32 | California | $19,711 | $67,451 | 29% |
| 33 | Ohio | $16,820 | $57,880 | 29% |
| 34 | Wisconsin | $16,796 | $58,738 | 29% |
| 35 | Illinois | $18,121 | $63,441 | 29% |
| 36 | Vermont | $17,145 | $60,156 | 29% |
| 37 | Oregon | $17,573 | $61,855 | 28% |
| 38 | Colorado | $18,903 | $67,302 | 28% |
| 39 | Virginia | $18,643 | $66,514 | 28% |
| 40 | Pennsylvania | $17,081 | $61,108 | 28% |
| 41 | Washington | $19,556 | $72,609 | 27% |
| 42 | Maryland | $19,542 | $73,492 | 27% |
| 43 | Michigan | $15,355 | $59,128 | 26% |
| 44 | Minnesota | $16,887 | $65,918 | 26% |
| 45 | New Hampshire | $16,707 | $67,805 | 25% |
| 46 | New York | $16,896 | $69,230 | 24% |
| 47 | Rhode Island | $15,739 | $65,230 | 24% |
| 48 | New Jersey | $17,210 | $74,282 | 23% |
| 49 | Connecticut | $16,134 | $73,347 | 22% |
| 50 | Massachusetts | $15,977 | $78,691 | 20% |
| 51 | District of Columbia | $17,900 | $100,580 | 18% |
So, how can drivers avoid overspending on car payments?
WalletHub recommends a few practical steps. First, try a “test run” by setting aside the amount of your potential monthly car payment for a few months. If it strains your budget, the loan might be too big.
Second, focus on the total price of the car (not just the monthly payment) and negotiate accordingly.
Other tips include shopping for shorter loan terms to reduce total interest, making a larger down payment to lower the overall loan amount, and comparing interest rates from multiple lenders.
Buyers should also consider used cars, which usually cost less up front, though financing rates can be slightly higher.
Buying a car shouldn’t put your entire financial life in reverse. Make sure you and your loved ones truly understand car loan terms before signing the dotted line.
