According a new Edmunds.com analysis, the average auto-loan length hit 69.3 months, an all-time high. Five years ago, it was 6.8% less.
Edmunds.com is a website that offers auto news and industry statistics.
The research also found that the average amount buyers were financing increased $631 in May to $30,945. The trend also revealed that payments were also higher with an average of $517 – in May, the average was $510.
Edmunds Executive Director of Industry Analysis Jessica Caldwell said buyers are able to get the vehicle they want – bells and whistles - by stretching the loan terms out to attain the monthly paymFent they can reasonably afford.
However, vehicles tend to depreciate quickly, which means borrowers may find that their loan is upside down.
Why Are People Taking The Risk To Be Upside Down
Caldwell said it’s extremely risky when borrowers are in an upside down loan for most of their loans. However, she said, the fact that consumers are spending more on a vehicle and paying longer means they’re feeling confident about the economy.
Financial terms like the rather-low, but slowly increasing interest rates are another reason for the demand for loans. Edmunds said the annual percentage rates dropped to just under 5% in June since February. A year ago, the APR rose to 5.7%, and it was 13.6% just five years ago.