The average loan term for new and used vehicles have jumped by one month, reaching all-time highs of 67 and 62 months, respectively, according to Experian Automotive’s just-released report for the first quarter of 2015.
The average new vehicle loan hit a new high as well: $28,711.
Meanwhile, the surging pace of auto and truck sales that fueled these record numbers continues. U.S. auto sales in May hit 17.79 million on a seasonally adjusted annualized basis, according to Autodata Corp, and that’s the highest since summer 2005.
Demand for new vehicles is creating greater accessibility to credit.
Auto loan terms lasting 73 to 84 months (7 years), accounted for a record-setting 29.5 percent of all new vehicles financed during the first three months of the year, an 18.6 percent rise over the first quarter of 2014, Experian said. This marks the highest percentage since Experian began publicly tracking this data in 2006.
Long-term used-vehicle loans also set new highs, with loan terms of 73 to 84 months, reaching 16 percent in the first quarter of 2015, rising from 14.2 percent the previous year — also the highest on record.
“While longer term loans are growing, they do not necessarily represent an ominous sign for the market,” said Melinda Zabritski, Experian’s senior director of automotive finance. “Most longer-term loans help consumers keep monthly payments manageable, while allowing them to purchase the vehicles they need without having to break the bank.”
However, Zabritski added, consumers should understand that if they take on a long-term loan, they need to keep the car longer, or they could face negative equity “should they choose to trade it in after only a few years.”
Average Monthly Payments Also Rising
The average amount financed and the average monthly payment for a new vehicle also increased to record highs. The average new vehicle loan was $28,711 in the first quarter of 2015, compared to $27,612 in Q1 2014. The average monthly payment for new vehicles also rose, moving from $474 in Q1 2014 to $488 in Q1 2015.
Additionally, leasing continued to increase in popularity during the quarter, jumping from 30.22 percent of all new vehicles financed in Q1 2014 to a record high of 31.40 percent in Q1 2015. During the same time period, the average monthly lease payment dropped to $405, down from $412 the previous year.
Leasing credit has loosened, Experian said, with the average new vehicle lessee having a credit score of 718 in Q1 2015, down from 721 the previous year.
“Increases in vehicle financing are signs of a strong automotive market,” continued Zabritski.