High car payments are eating into what homebuyers can afford. The average new-car monthly payment reached $770 in 2026, an all-time peak. Over a typical car loan term, this translates to roughly $135,000 in lost home-buying power for consumers stretched thin by competing debts.
Lenders and underwriters factor debt-to-income ratios when approving mortgages. A $770 monthly car payment reduces the amount banks will lend. For a buyer with a fixed income, that auto loan becomes a direct brake on mortgage eligibility. Someone earning $75,000 annually finds their mortgage pre-approval shrinking by six figures because of their vehicle debt.
This creates a cascading effect across the housing market. First-time buyers, already priced out in many markets, now face tighter lending standards. Sellers lose qualified buyers. Inventory sits longer. Builders face softer demand in entry-level segments where these cash-strapped buyers typically shop.
The numbers matter by region. In expensive coastal markets like San Francisco or New York, $135,000 in lost buying power eliminates entire neighborhoods from reach. In affordable Midwest markets like Columbus or Des Moines, the same reduction means stepping down from a $400,000 home to $265,000, a meaningful downgrade.
Renters contemplating the jump to homeownership now face a harder calculation. A $770 car payment plus rent often exceeds what a mortgage would cost. The rational choice becomes staying in apartments longer, delaying wealth-building through property ownership.
Auto manufacturers and dealers bear some responsibility. Extended loan terms, higher trim packages, and premium pricing push monthly payments skyward. Buyers finance five, six, or seven-year loans to make the payments manageable. Yet the damage to their mortgage power persists for years.
Landlords benefit