American Car Buyers Can't Get Enough of Long-Term Car Loans

american car buyers cant get enough of long term car loans

The low, low monthly payments offered by spreading the cost of a new or used vehicle across a vast gulf of time is certainly an attractive one, even though the practice is fraught with hidden danger.

For U.S. car buyers, it has also become a very popular one, with data showing just how many people have decided to embrace a 73- to 84-month payment plan. Not only are their spending habits changing, they’re also changing their lender.

According to data from information services company Experian published by Automotive News, long-term loans are proving increasingly popular with both new and used car buyers.

In the first quarter of 2009, the depths of the recession, 11.7 percent of auto loans were 73 to 84 months. At the time, consumer spending was not what it once was (or is now), with even stably employed people holding off on big ticket items like vehicles. Fast-forward eight years, and the picture changes drastically.

During the first two months of 2017, 33.8 percent of new-vehicle loans fell within this category. Not only that, term lengths within that top period are on the rise. Karl Kruppa, a senior automotive solutions consultant for Experian, says a full three-quarters of new-car loans in the fourth quarter of 2010 were 73 to 75 months. Now, borrowers are increasingly tapping the ceiling of that term window. In the final quarter of last year, 28.7 percent of those loans were for the full 84-month term, up from 17.1 percent in Q4 2010.

The trend carries over into used vehicles. While 30 percent of loans for 2016 model year vehicles fall within the 73 to 84 month term window, some lenders are now offering long-term loans on vehicles up to seven years old. Minuscule payments, yes, but with a larger cost of borrowing over the long term. With this kind of deal, be it on a new or old vehicle, cash-strapped buyers can find themselves in a much nicer vehicle than they thought they could afford — only to be soaked by interest or to realize their vehicle is worth less than what they owe.

Whatever the vehicle, consumers are increasingly turning to credit unions for their long-term loans. While banks and automakers’ financial divisions still see plenty of demand, credit unions see the most. Auto loans of 73 months or more made up 30.8 percent of the credit union portfolio in Q4 2016. For even longer-term loans, credit unions are still the preferred go-to.

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  • Mikey Mikey on Jun 01, 2017

    Some very interesting, and insightful comments here. Let me add my two cents worth. I would be one of those aging "boomers" . My wife and I worked long term for big corporations . Yes, and we enjoy that elusive benefit known as company pensions. We bought, and sold houses, a cottage, and countless vehicles. We paid for educations, weddings, and helped both kids with a down payment on their first house. Believe me, we gave "creative financing" a new meaning. That being said, early on we both vowed to be debt free before we turned 60. We hit that goal when I was 57. Today I get antsy when my Visa card hits $250.00 Just a little advice, to the much younger crowd here. Don't even entertain the thought of carrying debt into retirement. By all means, do what ever you need to do while bringing up family . If it means a 7 year loan to keep a reliable vehicle on the road ? Do what you have to do. Just keep in mind that one day you will be old. Don't make the mistake that so many of my fellow Baby Boomers have. I've watched too many of my peer group sign the retirement papers , while carrying car payments, and mortgages . I see those same people today, stocking shelves at Wall Mart, and working 12 hour shifts behind the wheel of a cab. Just my 00.2

  • Sportyaccordy Sportyaccordy on Jun 01, 2017

    We just bought 2 new to us cars (2012 G37S, 2011 MKX) with a decent bit down and 60 month loans. At 2.2% APR it was a complete no brainer; the combined interest on the 2 ~15K loans is about $1500. I also have no qualms about having these cars that far out... I bought a 10 year old 350Z and drove it for 2 years; one of the most reliable cars I've owned. Only real scare is infotainment honestly; My Ford Touch is modern enough for us and while the G's infotainment is a bit ancient the aftermarket has stepped in with some pretty slick updates.

  • MaintenanceCosts So someone really did build that car I drew while not paying attention in second grade. Too bad they screwed it up so badly.
  • MaintenanceCosts A bit after that experience, my family ended up owning an '88 Accord and an '87 Taurus--Detroit's big triumph--at the same time. The win for the Accord wasn't total; the Taurus's engine was better and it was quieter. But the difference in build quality and refinement can't be overstated.There were no rattles in the Accord, the materials are to this day some of the best in any car I've ever owned, every control operated with precision and just the right feel, and the ergonomics were perfect. By contrast, the Taurus was full of rattles from the day we got it, had hard plastic and slapdash fits all over the interior, had mouse-fur upholstery that showed wear by 60k miles, some parts of the control layout were nonsensical, and my car had a number of obvious assembly defects (including silver front bumper paint that all peeled off within five years). The cars' records in service also contrasted dramatically; the Taurus's lower purchase price (as a used car with similar mileage) was totally offset within a few years by higher repair costs.The thing that really puts an exclamation point on the contrast between the two cars is just how much better the Taurus was than its Fox-based predecessors.
  • Art Vandelay I am sure somewhere, somebody is saddened by this.
  • Dukeisduke It's becoming the norm for cats to be moved out of state for sale, and even out of the country. The thieves are looking for the easiest places to get rid of them, as laws tighten down in some places. Here in Texas, catalytic converter theft became a felony last September 1, so the stakes are going up.A couple months back, an off-duty Harris County (Houston) sheriff's deputy leaving a grocery store was murdered in the parking lot by a thief that was in the process of stealing the cat from his truck. As far as I know, they're still looking for the suspect, who would be charged with capital murder, and subject to the death penalty.
  • Dukeisduke Here's a real horror story: A friend of mine that's a commercial wallpaper installer owned an '09 Tundra, and had his cat stolen while he was working on a job in Dallas. He would normally have driven his work truck (an '03 Silverado with a zillion miles on it, and one engine replacement), but it was out of commission that day.At the end of the day when he got in the truck and started it, he noticed the noise, *and* saw smoke and flames. The thief had somehow cut or nicked the fuel line, causing gas to spray out. The truck burned to the ground in just a few minutes.He replaced it with a '19 Tundra, and the dealer installed a steel plate attached to the frame rails below the cats, and it's riveted (or maybe security bolts?) to the rails (I only saw it after dark, so I didn't get a really good look). He said the plate cost $750 to install. He says he'll never take the new one to work.