Auto Loans Lengthen

The average new-vehicle loan term reached 68.1 months in July, up slightly from 66.99 months a year earlier, Edmunds data show.

“Loan terms are either stagnant or increasing,” said Jessica Caldwell, senior analyst for “They just keep growing very slightly. It seems unlikely in near term that this will reverse.”

Long loan terms “really help people get into more expensive cars,” she added. “More people are buying more SUVs and trucks. Long loan terms are needed so people can afford that monthly payment.”

U.S. sales of light trucks rose 13 percent in July to 840,008 vehicles, while car deliveries fell 2.7 percent to 670,933. Overall, U.S. light-vehicle sales rose 5.3 percent to 1.51 million, according to the Automotive News Data Center.

Edmunds’ data show the average APR on a new-vehicle loan in July was 4.4 percent, the lowest average for a single month since September 2014.

“The low APR and long loan term go hand-in-hand with higher transaction prices,” Caldwell said.

In July 2014, the average APR was slightly lower, at just under 4.1 percent.

Last month the percentage of consumers who received 0 percent financing on their loans fell half a point from a year earlier to 13 percent, but the change is insignificant, Caldwell said.

“During the summer months is when we see that number of 0 percent loans spike” as dealers want to sell cars and get them off the lot before the fall, she said. “It’s usually high in July and August, but this year it was as early as May.”

July 2014’s APR of about 4.1 percent was significantly low, so now “we’re trending where things normally are,” Caldwell said.

A slight rise in APR could be the result of more subprime lending, Caldwell said. Edmunds doesn’t track subprime loans, but the number of consumers paying more than 10 percent interest on their auto loans is slightly higher than a year ago, she said. “As people get into the new-car market who don’t have the best credit, it ups this number a lot.”

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