ChatGPT Reveals How Much It Costs To Pay Off a Used Car in 5 Years
In February, Kelley Blue Book (KBB) chronicled the end of an automotive era. The last sub-$20,000 new car had rolled off the line as every major automaker moved to price its most affordable entry-level vehicle beyond the high teens.
In May, KBB followed up with a report that the average new car was selling for just shy of $50,000 — $49,461, to be exact. Those prices have forced budget-conscious buyers to the used market — but they’re not exactly giving away previously owned vehicles. Also in May, KBB reported that the average used car price had again topped $26,000 to $26,342.
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Most people don’t have that kind of cash, so they finance, typically for 60 months. I asked ChatGPT how much it would cost the average used car buyer to pay off their vehicle over five years. What I learned is that if you’re in the market for a previously owned set of wheels, start saving.
There Are 2 Financing Options: Expensive and More Expensive
May data from Edmunds, the most recent available, reveal an prohibitively expensive national patchwork of average used-car annual percentage rates (APRs).
Rates are still under 8%, albeit barely, in Vermont, Washington and Utah, with 10 others averaging between 8% and 9%. Most of the country, however, averages between 9% and 11%, with a dozen states suffering from average rates above 11% and 12%. Mississippi leads the nation with an average APR of 12.64%.
$6.5K in Combined Interest Is Getting Off Light
I asked ChatGPT to crunch those ugly numbers based on the average $26,342 used vehicle for a 60-month loan term. The artificial intelligence (AI) chatbot provided a table, converted to bullet points here, showing that many buyers will pay nearly one-third of the car’s value in combined interest.
8% APR
Monthly payment: $534.22
Total paid over 5 years: $32,053.20
Total interest paid: $5,711.20
9% APR
Monthly payment: $546.82
Total paid over 5 years: $32,809.20
Total interest paid: $6,467.20
10% APR
Monthly payment: $559.66
Total paid over 5 years: $33,579.60
Total interest paid: $7,237.60
11% APR
Monthly payment: $572.73
Total paid over 5 years: $34,363.80
Total interest paid: $8,021.80
12% APR
Monthly payment: $586.01
Total paid over 5 years: $35,160.60
Total interest paid: $8,818.60
If Your After-Tax Income Is $70K, the Average Used Car Is Technically Affordable
Edmunds notes that there’s no magic formula for how much is too much to spend on a car, but generally, experts recommend spending no more than 10% to 15% of your after-tax income on monthly payments.
ChatGPT determined that even at 12% interest, the $586.01 monthly payment is 10.05% of a $70,000 income. If you make that much after taxes, congratulations — a monthly payment approaching $600 for an average used car is somehow affordable.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice. It was created with the assistance of artificial intelligence and reviewed by our editorial team for accuracy; however, AI-generated content may be inaccurate, incomplete, or outdated. You should independently verify important information through reliable sources before making any decisions based on this content.
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