Automotive Consumers Sink Further in Debt
Most financing metrics hit records in the second quarter as more buyers locked themselves into long terms and high monthly payments.
Thirty-seven percent of new-vehicle buyers signed onto loans of at least 73 months, and 24% took out 84-month, both record highs.
Pexels/Ahsanjaya
A record share of automotive borrowers took out extra-loan terms in the second quarter as average monthly payments also reached all-time highs.
Thirty-seven percent of new-vehicle buyers signed onto loans of at least 73 months in the second quarter, according to Edmunds, and 24% took out 84-month loans or longer, also a historical high.
The 73-month-plus segment was up from 27% 10 years ago, the auto inventory and data provider reported.
As they stretched out the pay-off of their purchases, consumers financed on average the highest amount on record at $44,156, up 4% year-over-year and another record, Edmunds said. And 20% of borrowers agreed to monthly payments of $1,000 or more, tying a record set in last year’s fourth quarter.
“Until we see a major shake-up in automaker incentives, a meaningful drop in interest rates, or a shift toward a more affordable mix of vehicles — none of which appear to be on the horizon — consumers will have to keep walking this financial tightrope," said Edmunds Head of Insights Jessica Caldwell.
Buyers also put less money down at an average of $5,815, down 10% year-over-year. At just under 12% of the average purchase price, it was the lowest share since the third quarter of 2020 in the depths of the pandemic.
Consumers didn’t get a break on financing, either, as interest rates stayed elevated amid overall inflation and zero-percent financing remained scarce at just 1% of second-quarter buyers.
Buying used didn’t help much, as 6% of buyers in the segment left the lot with $1,000 or higher monthly payments to look forward to, another record share. The segment’s average financed amount was up about 5% year-over-year to $30,414.
DIG DEEPER: Smaller Loans, Longer Terms
More Auto Finance
Auto Refi Savings Surge
Consumers with 84-month auto loan terms who refinanced saved the most on monthly payments, according to a new report by auto refinancing provider Caribou.
Read More →
Subaru Enters Lending Business
The automaker follows other brands in adding captive financing in the U.S., and says the move will strengthen its position here.
Read More →
Positive Equity Reaches Record High
Mainstream vehicle owners who bought a car seven years ago are likely to have positive equity when trading in for a new vehicle, according to second-quarter Edmunds data.
Read More →
Dealerships Are Paying the Price for Extended Car Loans
Growing negative-equity scenarios mean such lengthy terms should be addressed in a forward-looking way to make them work for the dealer and the consumer down the road.
Read More →
Trade-Ins in Negative Equity Reach New Heights
As such trade-ins rise in frequency, so do monthly loan payment amounts and interest rates, according to second-quarter data compiled by Edmunds.
Read More →
Auto Credit Plentiful
June numbers show lenders are readily granting access, including to risky borrowers, as consumers leverage themselves to take on high prices.
Read More →
Porsche Financial Services Shifts Structure
After 36 years with Porsche, the Financial Services Chief Financial Officer Konrad Riedl is retiring, and the department is realigning its management structure.
Read More →
Tariffs Could Raise Insurance Premiums
As U.S. import tariffs affect repair costs, consumers might find it more affordable to replace a damaged vehicle, according to recent Insurify tariff analysis.
Read More →
Smaller Loans, Longer Terms
The youngest generation of car buyers is more likely to finance less expensive vehicles, more than half of generation Z consumers borrowing less than $25,000.
Read More →
New Cars a Tad More Affordable
May averages show that combined circumstances gave auto consumers slightly better buying power for the month, though average prices were up year-over-year.
Read More →