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Auto Loan Terms Reach All-Time Highs, Experian Reports

The average loan term for new and used vehicles has increased by one month, reaching new all-time highs of 67 and 62 months, respectively, according to a new report from Experian.

by Staff
June 2, 2015
3 min to read


SCHAUMBURG, Ill. — Longer-term loans for both new and used vehicles are on the rise, according to Experian Automotive. The firm’s latest State of the Automotive Finance Market report shows that the average loan term for new and used vehicles has increased by one month, reaching new all-time highs of 67 and 62 months, respectively.

Findings from the report also showed that longer loans — those with terms lasting 73 to 84 months — accounted for a record-setting 29.5% of all new vehicles financed, an 18.6% rise over first quarter 2014 and the highest percentage on record since Experian began publically tracking this data in 2006. Long-term used-vehicle loans also broke records, with loan terms of 73 to 84 months, reaching 16% in first quarter 2015, rising from 12.94% the previous year — also the highest on record.

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“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, it is critical for consumers to understand that if they take a long-term loan, they need to keep the car longer or could face negative equity should they choose to trade it in after only a few years.”

The average amount financed and the average monthly payment for a new vehicle also increased to record heights. The average new vehicle loan was $28,711 in first quarter 2015, compared to $27,612 in first quarter 2014. The average monthly payment for new vehicles also rose, moving from $474 in first quarter 2014 to $488 in first quarter 2015.

The average credit score for a new vehicle loan dropped slightly, going from 714 in first quarter 2014 to 713 in first quarter 2015. The average used vehicle score moved slightly higher, from 641 in first quarter 2014 to 643 in first quarter 2015.

During 2015’s first quarter, the average used vehicle loan was $18,213, up from $17,927 in first quarter 2014. The average interest rate for new vehicles was 4.71% in first quarter 2015, up from 4.54% in first quarter 2014. Similarly, the average interest rate for used vehicles increased from 9.01% in first quarter 2014 to 9.17% in first quarter 2015.

Additionally, leasing continued to increase in popularity during the quarter, jumping from 30.22% of all new vehicles financed in first quarter 2014 to a record high of 31.46% in first quarter 2015. During the same time period, the average monthly lease payment dropped to $405, down from $412 the previous year. Furthermore, leasing credit loosened, as the average new vehicle lessee had a credit score of 718 in first quarter 2015, down from 721 the previous year.

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“Increases in vehicle financing are signs of a strong automotive market,” Zabritski added. “By gaining a deeper understanding of current financing trends, lenders are able to stay competitive and better meet the needs of the marketplace, while consumers can use the data to become more educated on the different vehicle financing options and make a more informed purchasing decision.”

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