Auto Loans Getting Longer to Accommodate Higher Prices
Average Credit Score of Buyers at Seven Year Low
The price of new cars, and especially trucks and SUVs, continues to amaze and frustrate us. Going by the conventional metric of a five-year loan and 10 to 20 percent down, it’s getting harder and harder to keep the monthly payment below $500. That’s one explanation for the increasing popularity of leasing with some buyers, which gives a lower monthly payment but more restrictions on mileage and forces lessees to roll over into a new lease or pay the difference to purchase the vehicle. For conventional loans, up to seven year (84 month) loans are becoming commonplace, to help buyers afford the monthly payments, Reuters reports.
The report also said that the average credit score of the new car buyer is 710, a seven-year low since the Great Recession of 2007-2008. Other potential warning signs of an overheated market are a nine-year record high in the average auto loan amount, a record 86.6 percent of vehicle purchases being financed, and leases accounting for 27 percent of new vehicle purchases. Whether this is simply the “new normal” or the sign of a coming auto market bubble remains to be seen. November 2015 sales were at a 14-year high. Total auto sales for 2015 are projected to possibly top the previous annual record of 17.4 million in 2000.