The recently passed One Big Beautiful Budget Bill’s new tax break of up to $10,000 per year may sound good to consumers, but only a small fraction of car owners are expected to qualify, according to auto refinance platform Caribou.
And for the relatively few car buyers who qualify, the average annual tax savings will be about $333 — far less than the $10,000 maximum — based on a typical new car loan amount of $41,720, an average interest rate of 6.73%, and a loan term of 68.63 months, Caribou stated in a news release.
Specific limitations significantly restrict who can benefit from the new deduction:
Purchase Date: The vehicle must have been bought on or after Jan. 1.
U.S. Assembly: The car must be for personal use and assembled in the United States. For such vehicles, the VIN starts with 1, 4, or 5.
Income Thresholds: The deduction starts to phase out at a modified adjusted gross income of $100,000 for single filers and $200,000 for joint filers. A deduction is not available for single filers with a MAGI over $149,000 or joint filers with a MAGI over $249,000.
A Small Slice of the Pie
Caribou estimates that only 2.8 million Americans — less than 3% of the 100 million with auto loans, will qualify for the deduction.
About 13 million new cars are projected to be purchased for personal use in 2025, according to Cox Automotive.
About 50% of new vehicles sold in the U.S. are assembled in the U.S., according to U.S. government figures.
About 57% of new cars are financed with a loan, according to TransUnion.
1% of U.S. consumers qualify for the full deduction based on income, according to Statista.
There are about 100 million auto loans in the United States, according to CFPB.
Refinancing a Still Choice for Millions
Although millions car buyers won’t qualify for the new deduction, they can significantly lower their monthly payments and reduce total interest costs through auto refinancing, Caribou stated in the release.
“Refinancing offers a powerful alternative for drivers looking to save on their auto loans — regardless of their car’s age, type, where it was assembled, or their income level,” the auto refinance platform stated. “While the new deduction is out of reach for most Americans, refinancing is widely accessible and can deliver even greater, consistent savings,” the company said.
