Auto loans lengthen, but buyers stay in loans for less time

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.