Home Cars New-car loans lasting 73 to 84 months jump 300% in 8 years

New-car loans lasting 73 to 84 months jump 300% in 8 years

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Lenders are approving loans with terms up to 84 months on vehicles more than 5 years old.

LAS VEGAS — The number of new-vehicle loans lasting 73 to 84 months has surged 300 percent in the past eight years, according to Experian.

In the first quarter of 2009, 11.7 percent of new-vehicle loans were 73 to 84 months, Karl Kruppa, senior automotive solutions consultant for Experian, said at CU Direct’s Drive ’17 conference here last week. Through February 2017, 33.8 percent of loans were 73 to 84 months.

Even within that bucket, term lengths are creeping up. In the fourth quarter of 2010, three-quarters of new-vehicle loans in the 73- to 84-month category were between 73 and 75 months, Kruppa said. “Now we are seeing more and more lenders willing to go all the way up to 84 months,” he said. In the fourth quarter of 2010, 17.1 percent of new-vehicle loans were 84 months. In the fourth quarter of 2016, 28.7 percent of new-vehicle loans were 84 months.

Used affected, too

Longer terms are becoming more commonplace in used-vehicle financing, too. Most long-term loans still are on late-model used vehicles, Kruppa said. For example, about 30 percent of 2016 model-year vehicles are financed with 73- to 84-month loan terms. But lenders also are approving long-term loans on vehicles more than 5 years old. “You know what’s kind of startling?” Kruppa said. “There’s actually 10 percent of [2010 model-year] used vehicles being financed at a term between 73 and 84 months. Longer terms are here, and more and more lenders are willing to do that.”

Credit union support

Loans lasting 73 months or longer made up a significant chunk of the overall portfolio for banks, automakers’ captives, credit unions and independent finance companies in the fourth quarter of 2016. The segment’s share was largest, however, at credit unions, at 30.8 percent. Still, loan terms at credit unions are relatively evenly distributed. The share of terms running 61 to 72 months was 31.8 percent, and loans of 60 months or fewer made up 37.4 percent of the portfolio.

Lenders in the U.S. allow very few loans above 96 months, Kruppa said, but in the fourth quarter, credit unions supported more than half of the auto finance market’s loans in that segment.

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