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Loans with Terms 73-84 Months Grew by 27.6 Percent; CU Chief Lending Officer Says Low Interest Rates Contributing to This
Tuesday, June 3, 2014 7:00 AM

Experian Automotive announced yesterday that loan terms continued to lengthen, with the average automotive loan term reaching 66 months for the first time. According to Experian Automotive’s latest State of the Automotive Finance Market report, loan terms in the first quarter of 2014 reached the highest level since the company began publicly reporting the data in 2006.

The analysis also shows that loans with terms extending out 73–84 months made up 24.9 percent of all new vehicle loans originated during the quarter, growing 27.6 percent since Q1 2013.The average amount financed for a new vehicle loan also reached an all-time high of $27,612 in Q1 2014, up $964 from the previous year. In addition, the average monthly payment for a new vehicle loan reached its highest point on record at $474 in Q1 2014, up from $459 in Q1 2013.

Jeff Dahlgren, vice president and chief lending officer with Cherokee Strip CU, isn’t surprised.

“Cars today cost more. With an average new vehicle car loan being $40,000, borrowers are stretching out the term to get lower monthly payments,” he tells the Leaguer. “Depending on your credit score, Cherokee Strip Credit Union members can receive a rate as low as 2.49 percent for up to 84 months. With a rate like that, our members aren’t in as big of a hurry to pay the loan off quickly.”

Dahlgren says the credit union offers an auto loan rate of 1.99 percent rate for 36 months; however, in the last three months, he’s only written two of these loans.

The Experian Automotive report also finds that consumers continue to lease new vehicles at record levels. Of all new vehicles financed, 30.2 percent were leased in Q1 2014, compared to 27.5 percent in Q1 2013. Interestingly, of all new vehicles sold (whether financed or purchased in cash), a staggering one in four, or 25.6 percent, were leased in Q1 2014, compared to 22.9 percent in Q1 2013.Overall, loans and leases for new vehicles were easier to obtain in Q1 2014. For new vehicle loans, the average credit score was 714, down from 722 in Q1 2013. For leases, the average credit score was 721 in Q1 2014, compared to 731 in Q1 2013.

Subprime financing rises for new vehicles and drops for used vehicles. Market share for nonprime, subprime and deep subprime new vehicle loans rose slightly in Q1 2014 to 34.34 percent from 33.68 percent in Q1 2013. For used vehicles, nonprime, subprime and deep subprime loans accounted for 64.2 percent of all loans, down 2.6 percent from 65.91 percent in Q1 2013.

In other trends:

  • The average credit score for a used vehicle loan in Q1 2014 was 641, up from 637 in Q1 2013
  • Average monthly payments for used vehicles rose from $348 in Q1 2013 to $352 in Q1 2014
  • New vehicle interest rates rose from 4.47 in Q1 2013 to 4.54 percent in Q1 2014
  • Used vehicle interest rates rose from 8.75 percent in Q1 2013 to 9.01 percent in Q1 2014