Car Loans Get Longer, Credit Scores Get Lower, and We're More Reliant on Automakers for Money and Cars Now

Aaron Cole
by Aaron Cole

In news that will shock precisely no one, the current car blitz is partially fueled by longer loan rates, higher monthly payments and an increasing prevalence to finance our new cars from the automaker themselves — when we’re not renting it from them in the first place.

Experian released Wednesday its data on third-quarter sales and financing and found, on average, that borrowers’ credit scores were at the lowest level since before 2008. According to the credit agency, car buyers had an average credit score of 710 when they financed their car — which happens in 86.6 percent of car transactions, an all-time high.

Buyers opted for longer loans too. According to the data, new car loans longer than six years increased to 27.5 percent for the third quarter, up 17.1 percent from the same period last year. Loans between five and six years accounted for 44 percent of new vehicle financing.

The agency also reported that leasing is becoming more popular for new buyers. More than 1 in 4 buyers opts to lease new vehicles instead of purchasing them, Experian noted. On average, lessees saved $84 per month than buyers. A new car buyer, on average, is paying a $482 monthly nut.

“While consumers can save an average of $84 per month by leasing rather than taking out a loan on a new vehicle, they should make sure leasing fits their lifestyle. Oftentimes there are mileage caps and other considerations that consumers should familiarize themselves with before entering into a leasing agreement,” Melinda Zabritski, Experian’s senior director of automotive finance, said in a statement.

And buyers aren’t necessarily leaving the showroom for money either. Captive financing, which is funded through an automaker-owned bank, scripted more than half of new-car loans in the third quarter of 2015. That represents a nearly 15 percent jump from the same period four years ago.

“Captive lending has made a comeback since suffering a steep drop-off caused by declining new sales and lender-type shifts during the recession,” Zabritski continued. “This is good news for manufacturers, as their captive finance companies often provide an additional source of revenue as well as a strong pipeline to credit for their dealer networks.”

Join the conversation
7 of 98 comments
  • Gearhead77 Gearhead77 on Dec 03, 2015

    I'm fine with people buying on monthly payment, as long as they stick to a budget. You budget $350/month max and find something at or below that. But, and automakers/dealers/retail in general know this. So they advertise and put one or two cars on the lot that COULD be had for that price. But they sell quickly or no one wants them due to lack of options. So they have a bunch more that will be $400/month. It's only an extra $50 a month. For some, that's not much, for many, it's more than they realize. And then that vehicle is advertised for 25 mpg but only gets 17mpg. Then gas goes up in price. And they start driving more. Now they're way over $50 more per month. And that's a minor example.

  • Steven Lang Steven Lang on Dec 03, 2015

    Everyone has their own unique viewpoint when it comes to the finance/lease paradigm. I don't believe in judging others either way. Certain auto enthusiasts and maintenance averse buyers are happier with leases. Other folks who are keepers instead of traders are more comfortable with a 'buy and hold' strategy. I live in a rust free area of the world (northwest Georgia) that is surprisingly friendly towards keeping an older vehicle. If I were near the Great Lakes and had some extreme type of advantage with leasing I would probably go that route. There are folks out there who can jump on a great lease and then take a healthy tax deduction. In fact, the Nissan LEAF and Chevy Volt are rolling embodiments of that idea. If you have the environment and the interest in becoming a keeper, do it. Life is a lot less stressful when you're an owner instead of a debtor. But if a new car thrill every three years or so outweighs that potential stress, go with that. There isn't much else to it.

    • See 4 previous
    • Dal20402 Dal20402 on Dec 03, 2015

      @dal20402 Depends what you are buying. I bought during a glut of inventory, and got full cash incentives in addition to the 0%. Sometimes there are actually good deals out there, because sometimes manufacturers make mistakes, and providing super-cheap financing is a cost-effective way to fix them. Not everything is a con job, and there is no guarantee that further cash incentives offered instead of the 0% would have been as attractive a deal. Incidentally, I'm halfway convinced we're in a new normal with respect to interest rates. The zero lower bound has proven illusory, both creditors and debtors have something to gain from super-low rates, there has been essentially no inflation in any asset class other than real property in select markets and college tuition, and I don't see what force is going to cause central bankers to push rates back up 5 points.

  • Sam Who do I sue when the car doesn't do what I want it to and that action of the car being autonomous caused the crash?
  • Norman Stansfield Automatic braking systems reward bad behavior. Stop incentivizing lousy driving behavior.
  • Kwik_Shift It was an annoying feature on my 2018 Nissan Sentra SV. Bugs, leaves and snow would disable it. Should have been a better design .
  • Master Baiter A regulator's job is never done, so yeah, bring on the next level of regulations.
  • DedBull The automatic braking system in my wife's 2019 Tiguan is easily defeated by the slightest amount of solid precipitation, which is not uncommon here in western Pennsylvania. Fortunately we have regular speed-holding cruise control, because the active cruise control uses the same sensor and becomes inactive in the same conditions. It was infuriating in our loaner. I've had a few false-positives over the years, plus a couple where it didn't like my rate of deceleration. Interestingly it did not intervene at all when I had a deer strike a couple years ago. I don't mind the application of the tech, but I think they are setting a pretty high bar going forward. I'm also cautious of over-reliance on tech in vehicles.