Customers purchasing new vehicles are selecting longer term loans in higher numbers than in the past.
According to Automotive News, the number of new car loans between 73 and 84 months has shot up from 11.7 percent in early 2009 to 33.8 percent this year. This is a substantial increase of 22.1 percent and loans within that range are tending to be on the longer side.
During the final quarter of 2016, 28.7 percent of new vehicle loans were for a term of 84 months. That means consumers are willing to make payments on their vehicle for seven years.
The used car market is also seeing a shift to long term loans, and some analysts are surprised by what lenders are willing to do. As Experian senior automotive solutions consultant Karl Kruppa noted, 10 percent of loans for used vehicles from the 2010 model year are for between 73 and 84 months. That means the car could be up to 14 years old by the time is it paid off.
Credit Unions had the largest share of long term loans in the study, but they have a pretty even distribution of short, medium, and long term automotive loans.
The report declined to say why consumers are flocking to long term loans but it could have something to do with shifting consumer preferences which now favor trucks and crossovers. Cars are typically cheaper, so consumers might be using longer term loans to make trucks and crossovers more affordable to them.
Photo Gallery
