Auto loans lengthen, but buyers stay in loans for less time
A new study by TransUnion found that even as the term of new auto loans has increased, the time a consumer stays in the loan has shortened.
The average term for new auto loans rose to 67 months in 2015 from 62 months in 2010. In third-quarter 2015, seven in 10 auto loans were longer than 60 months, compared with just half of loans five years earlier.
Longer-term auto loans have grown in popularity as consumers aim to keep monthly payments at a certain threshold, said Jason Laky, TransUnion senior vice president. However, consumers are keeping their loans for a shorter period. That is likely because low interest rates allow more borrowers to refinance their loans.
Very long loans have grown. One quarter of loans originated in third-quarter 2015 were between 73 and 84 months, compared with just 10 percent five years earlier.
Even as average loan amounts increased, the average monthly payment dropped. In third-quarter 2015, the average new loan amount was $21,368, compared with $18,009 in third-quarter 2010. The average monthly payment dropped to $398 from $420.
But consumers with longer loans are more likely to be seriously delinquent (60 days or more past due) than those with shorter terms, even when controlling for credit score.Download Bulletin PDF