With American auto loan debt reaching $1.66 trillion, the personal finance company WalletHub has released its report on the Cities Where People Overspend the Most on Cars in 2025. The analysis highlights where consumers are taking on the most auto loan debt relative to their income.
WalletHub compared the median auto loan balances and incomes across more than 2,500 U.S. cities, ranking them based on their auto debt-to-income ratios.
| Worst Debt-to-Income Ratio | Best Debt-to-Income Ratio |
| 1. Rio Grande City, TX | 2521. Hingham, MA |
| 2. Northglenn, CO | 2522. Palo Alto, CA |
| 3. Donna, TX | 2523. San Carlos, CA |
| 4. Mercedes, TX | 2524. Lexington, MA |
| 5. Jackson, GA | 2525. Lafayette, CA |
| 6. Bastrop, LA | 2526. Needham, MA |
| 7. San Juan, TX | 2527. Los Altos, CA |
| 8. San Benito, TX | 2528. Chevy Chase, MD |
| 9. Deming, NM | 2529. Bronxville, NY |
| 10. Uvalde, TX | 2530. Scarsdale, NY |
For the full report, please visit:
https://wallethub.com/edu/cl/
“Many Americans are overspending on cars; in over 160 cities, the average resident’s auto loan debt is the equivalent of half or more of their yearly income. Residents dealing with these expensive loans on top of debt from credit cards, personal loans, student loans and mortgages are at risk of falling behind on payments and having their vehicles repossessed. Buying less-expensive, used vehicles or saving up money to minimize loans can help prevent unsustainable auto loan debt.”
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“Rio Grande, TX, is the city where people overspend the most on cars because the median auto loan debt is $32,173 while the median income is just $33,782. That means the ratio of residents’ auto loan debt to their income is 95%, the highest in the country by a large margin.”
- Chip Lupo, WalletHub Analyst
Expert Commentary
What are the most common mistakes people make when shopping for a car?
“Many of the mistakes people make when buying a car are the same ones they make with any major purchase: buying without a solid financial foundation. Without clear financial goals, an understanding of your personal values, and a consistent budgeting system, it’s easy to overspend. A common scenario is falling in love with a car on the lot before checking your budget – then stretching the loan to 84 months just to make the monthly payment fit. Sometimes people technically “can” afford the payment, but it’s a stretch that jeopardizes other priorities like saving for emergencies, paying down debt, or investing for the future. Another mistake is skipping thorough research – such as comparing prices, checking reliability ratings, and understanding the total cost of ownership, including insurance, fuel, depreciation, and maintenance. With preparation and a clear plan, you can choose a vehicle that meets your needs without undermining your other financial goals.”
Kayleen Salchenberg – Accredited Financial Counselor (AFC); Program Manager & Instructor, Center for Advancing Financial Education, Oregon State University
“Some common mistakes are: (1) Focusing ONLY on monthly payments if you are borrowing a loan, since dealers can always change loan terms; (2) Not enough research: some brands/models are more expensive to fix/maintain; (3) Unnecessary add-ons/accessories: they are always unnecessary, please negotiate if you really need them.”
Yiwei Zhao – Assistant Professor, Longwood University
In what circumstances is leasing a smarter option than buying?
“Leasing can make sense if you like driving a new car every few years, don’t drive too much and can stay within mileage limits, and want lower monthly payments. Leasing can also be smart for drivers who value the advanced safety features in newer cars, and for self-employed people who plan to expense their car.”
Eric Young – Senior Instructor, Loyola Marymount University
“I would say virtually never. These deals favor the seller and not the buyer. The monthly payments may be lower but you will end up paying more for less value and have nothing to show for it at the end of the lease.”
John J. Bethune – Professor, Barton College
Generally, what percentage of take-home pay should go to car payments?
“While there’s no one-size-fits-all answer, many financial experts suggest keeping your auto loan payment under 10% of your take-home pay, with the total car-related expenses (including insurance, fuel, maintenance, etc.) capped at 15% to 20%. This guideline is meant to preserve cash flow for housing, savings, debt repayment, charitable contributions, and other priorities. But a percentage alone isn’t enough because everyone has a larger financial picture – before taking on a car loan, consider other factors like your debt-to-income ratio (DTI) and your net worth (assets minus liabilities). A high DTI or low/negative net worth may indicate that even a ‘manageable’ payment could strain your long-term stability. Also consider your psychology - when you consume now, that is money not available for your future self. A car loan commits part of your budget for its full term, which limits flexibility. That’s not inherently bad – many of us need a reliable vehicle – but the payment should still allow you to live within or below your means, build savings, and strengthen your overall financial position.”
Kayleen Salchenberg – Accredited Financial Counselor (AFC); Program Manager & Instructor, Center for Advancing Financial Education, Oregon State University
“If your car payment’s eating more than 15% of your take-home pay, you’re not driving a ride – you’re letting it drive your wallet into a ditch… I personally like getting my % as close to 0 as possible. I see cars as needs and not wants. But we are all different… The sweet spot? 10% or less. That’s the level where you can make the payment, cover insurance, gas, and maintenance, and still have breathing room for, you know, actual life. You want a car to get you places, not chain you to the grind.”
Stephen Heath – Professor, College of San Mateo
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