US Treasury Secretary on Wednesday, January 7 Scott Bessent He touched on affordability, a major issue for the U.S. auto industry, and said the administration is working on a significant tax cut that could help many buyers.
This move is surprising, considering President Donald Trump recently called for it. The economic crisis in the USA is a scam. Still, Bessent’s comments suggest the administration is focused on improving affordability during the election year.
The threat of tariffs and rising prices in 2025 caused a large number of car buyers to purchase a new vehicle, creating the strongest market in recent years.
Retail consumers spent $620 billion on new vehicles last year. Automotive WorldAccording to JD Power data, there was an increase of approximately 6% compared to the previous year. The increase resulted from a threat that never materialized.
“Despite so much speculation “As for the large increases in new vehicle prices due to tariffs, actual increases have been muted, as J.D. Power correctly predicted.” the company said.
But despite the easing impact of tariffs, affordability remains an issue.
“But the industry is not without its challenges. Affordability pressures remain significant, with monthly finance payments reaching a new record of $776 for December,” said Thomas King, president of OEM solutions at J.D. Power.
The combination of high prices on loans and stubbornly high interest rates is causing Americans to turn to riskier loan deals to buy new cars, straining wallets.
On Wednesday, U.S. Treasury Secretary Scott Bessent offered some much-needed assistance to car buyers struggling to afford a new vehicle.
The Treasury announced it is implementing the No Tax on American Auto Loan Interest rule, which offers eligible taxpayers a $10,000 annual deduction on auto loan interest for cars purchased during Trump’s second term.
Related: Ford CEO Jim Farley ‘scared’ of $19 billion problem, US senator says
-
GM: 2.83 million vehicles (+5.1% y/y); 17.3% market share
-
toyota: 2.52 million vehicles (+8.4% y/y); 15.5% market share
-
ford: 2.18 million vehicles (+5.6% y/y); 13.4% market share
-
hyundai: 1.84 million vehicles (+7.9% y/y); 11.3% market share
-
honda: 1.42 million vehicles (+0.6% y/y); 8.8% market share
Source: Cox Automotive
“For millions of Americans, a car is not a luxury; it is a way of getting to work, school and child care.” Bessent said in X.
“This deduction helps lower monthly costs and makes car ownership more affordable when families need it most. The tax break also supports American workers and strengthens domestic manufacturing by applying only to vehicles assembled in the United States.”
Bessent, Treasury and IRS We set clear rules regarding the tax deduction “so taxpayers know exactly how the deduction works.”
Automakers have relied on incentive pricing to help ease consumers’ affordability concerns in 2025.
“Automakers are providing healthy incentives to keep sales flowing. Prices are trending higher, but as we’re seeing in broader retail markets, there’s adequate demand and generous incentives driving the market,” Cox Automotive Executive Analyst Erin Keating said earlier this year.
Related: Foreign automaker breaks record in 2025 despite tariffs, plans to expand in 2026
But as the year progressed and the tariff situation became clearer, incentive spending decreased.
The average manufacturer’s incentive spending per vehicle in December was $3,433; this represented an increase of only $77 over the same period the previous year. On average, incentive spending represents approximately 6.5% of a vehicle’s MSRP; This is an increase of 0.1%.
To close the gap, more customers are applying for extended loan terms of 84 months, which accounted for 10.1% of financed sales in December, according to J.D. Power.
This is the second highest level recorded in the month after 2021.
Most financial experts recommend spending no more than 15% of your monthly income on a vehicle.
In addition to limiting your car payments to about 15% of your monthly take-home pay, financial experts recommend shoppers aim for a 20% down payment, a loan term of 36 to 48 months, and expenses (including insurance) between 8% and 10% of your gross monthly income.
According to a MarketWatch Guides surveyAbout 10 percent of drivers said they spend 30 percent of their monthly income on driving, while another 12 percent said they are “living paycheck to paycheck due to the financial strain of their cars.”
Nearly half of American drivers cite car expenses as the reason they can’t save money, and the average American spends nearly 20% of their monthly income on auto loans, fuel, insurance and maintenance.
A. Bank of America’s survey this summer It found that 20 percent of households with a monthly car payment pay more than $1,000.
Baby Boomers, Gen
Gen Z and younger Millennials have seen an increase in the number of members paying more than this amount.
Bank of America also saw an increase in monthly auto bills of $2,000 for people making less than $50,000 and those making between $50,000 and $100,000. Meanwhile, such spending has decreased among people earning more than $100,000.
“Bank of America payment data shows that overall average car payments are already 30% higher than the 2019 average and now outpace both new and new payments. used car “Prices are probably higher because there is a push towards more expensive cars,” analysts Taylor Bowley and David Tinsley said. wrote.
Related: Ford and GM take issue with Elon Musk’s special treatment
This story was first published by . Street First appeared on January 8, 2026 Economy section. Add TheStreet at: Preferred Source by clicking here.
