Source: CNBC – Phil LeBeau.
The surge in auto prices in the second half of 2021 has pushed more consumers to take out auto loans that stretch beyond six years, according to a new report analyzing how millions of consumers finance the vehicles they have purchased.
Credit monitoring service Experian, which analyzes new and used vehicle loans, says more than a third of all new vehicles bought in the fourth quarter were financed with loans that have terms of 6½, seven or even 7½ years.
Longer loan terms are one way auto buyers are trying to offset a spike in new and used vehicle prices sparked by the low inventory of new cars and trucks.
“The uptick (in loan amounts) is not solely attributed to inventory shortages, it’s partly due to consumers simply buying larger vehicles,” said Melinda Zabritski, senior director of automotive financial solutions for Experian.
In the fourth quarter, the average amount financed for a new vehicle loan jumped $4,300 compared with the same time in 2020, hitting an all-time high of $39,721. While consumers have tried to lower their payments by taking out loans with longer terms, the average monthly payment still increased $65 to a record high of $644.
The numbers are the latest indication strong demand and low inventories have combined to drive auto prices much higher. “What I think you are seeing is the general lift from the heavy discounting in 2018 and 2019,” AutoNation CEO Mike Manley told CNBC after the auto dealer reported very strong fourth-quarter earnings.
Keep reading: https://www.cnbc.com/2022/02/24/as-auto-prices-soar-more-buyers-take-out-6-and-7-year-loans.html
