The recently enacted "One Big Beautiful Bill" (OBBB) is a comprehensive piece of legislation impacting various sectors of the American economy, including consumer financial matters. While some members of the American Financial Services Association (AFSA) concentrated on the bill's reduction of the Consumer Financial Protection Bureau's funding, another provision in OBBB may enhance consumer financial flexibility and benefit the vehicle finance market by promoting the purchase of American-made vehicles.
The OBBB introduces a tax deduction for auto loan interest on new vehicles assembled in the United States and purchased between 2025 and 2028. This deduction is capped at $10,000 and phases out for single filers with incomes between $100,000 and $150,000, and for joint filers with incomes between $200,000 and $250,000. In early 2025, 16.3 million new light vehicles were sold in the U.S., with approximately 60% or nearly 10 million being domestically assembled. The deduction mirrors a proposal previously suggested by Sen. Bernie Moreno (R-OH).
According to Cox Automotive, the average transaction price for a new vehicle was around $49,000 in May 2025. Based on AFSA calculations, an individual financing such a vehicle with a 10% down payment and a 72-month loan at a 6.5% interest rate could receive a tax deduction of about $3,000 in the first year of ownership and roughly $1,800 annually over the loan term. Additionally beneficial to consumers is that interest on multiple auto loans can be deducted as long as it remains under the $10,000 limit.
While implementation details are expected to be clarified by the Internal Revenue Service and other federal agencies, this auto loan interest deduction has significant potential to assist consumers considering purchasing new vehicles. AFSA will continue monitoring regulatory developments related to OBBB and provide updates.