Longer Auto Loans Becoming the Norm

Washington DC March 20, 2006; The AIADA newsletter reported that auto dealers and lenders continue to increase the length of car loans as a result of an increase in consumers who demand low monthly payments, reports Automotive News.

A report by the Consumer Bankers Association said loans greater than 60 months accounted for 55.3 percent of its members' new vehicle loans in 2005, up 10 percent from the previous year. According to the paper," longer loan terms enable customers to buy pricier vehicles at an acceptable monthly payment. That can mean fatter profits for automakers, dealers and lenders.

But longer loans also stretch the interval between new-vehicle purchases." Consumers who want to keep their monthly payments low are also stretching their loans because of higher interest rates.

"Earlier this month, the average interest rate on a new-vehicle loan was 7.95 percent, up from 7.17 percent last year and 6.21 percent in 2004," according to J.D. Power and Associates.