- Lenders are increasingly willing to grant 6- or 7-year loan terms for used cars
- The move is helping bring monthly payments down for borrowers with good credit
As both new and used cars have grown more expensive in recent years, new trends have emerged in the way Americans pay for them.
Among the surprises: More Americans now take out a 6- or 7-year loan to buy a used car.
Credit reporting agency Experian flags the data in its latest quarterly report on the auto loan market. Nearly 70% of used car loans are now granted with 72-month or longer terms, the agency reports.
Banks are more willing to grant the long loans because today’s cars tend to be higher quality than those of a generation or two ago. The average car on American roads is now pushing 13 years old.
Melinda Zabritski, Experian’s head of automotive financial insights, told industry publication Automotive News, “The lending market has greater confidence in being able to do a 72-month term loan on a 5-year-old vehicle and know that it’s still going to be on the road at the end of that term.”
Longer loan terms keep borrowers in debt for longer, but can bring down monthly payments. That seems to be happening. The average monthly payment is lower this year than last for those with credit scores of 670 or higher (three groups Experian terms Near Prime, Prime, and Super Prime).
