Record-Long Car Loans Surge as Americans Struggle with Soaring Vehicle Prices

American car buyers are committing to longer loans than ever before. Soaring vehicle prices have forced many into difficult financial decisions. Nearly one quarter of new car buyers now choose ultra-long repayment terms.

This trend offers short-term payment relief but creates significant long-term risks. Many owners will find themselves underwater on their loans.

84-Month Car Loans Reach Record Popularity

The average new vehicle price remains near $50,000. This high cost has pushed buyers toward extended loan terms. According to Edmunds, 22.4% of new car loans now span 84 months or longer.

This represents a historic high for extended auto financing. Six-year loans have become the most common option. They account for 36.1% of all new vehicle financing.

Shorter loan terms have dramatically declined. Only 4% of buyers choose three-year loans today. Five-year loans have dropped to just 19% market share.

Even eight-year loans are quietly emerging. They remain below 1% of the market but are steadily growing. This signals continued affordability pressure on consumers.

Negative Equity and Financial Risks Increase

Longer loans create higher total costs for consumers. Interest accumulates over additional years of payments. According to Edmunds, the average interest on an 84-month loan reaches $15,460.

This is approximately $4,600 more than a five-year loan. The payment relief comes with a substantial financial penalty. Many owners also face negative equity situations.

Edmunds reports that 26.6% of trade-ins now carry negative equity. This is the highest percentage since early 2021. The average owed amount reaches $6,754 beyond the vehicle’s value.

Dealers recognize the problem with these extended terms. Mike Schwartz of Galpin Motors told Bloomberg they steer customers away from longest loans. They want to avoid putting customers in difficult financial positions.

Record-long car loans represent a growing challenge for American consumers. While providing temporary payment relief, they create long-term financial vulnerability. Buyers should carefully consider the total cost before committing to extended terms.

Frequently Asked Questions

What percentage of car buyers choose 84-month loans?

According to Edmunds data, 22.4% of new car buyers now choose loans lasting 84 months or longer. This represents a record high for extended auto financing terms.

What is the main risk of long car loans?

The primary risk is negative equity, where owners owe more than the vehicle’s value. This makes trading in or selling the vehicle difficult without additional cash.

How does loan length affect total interest paid?

Longer loans dramatically increase total interest costs. An 84-month loan averages $15,460 in interest, about $4,600 more than a standard 60-month loan.

Are eight-year car loans available?

Yes, 96-month (8-year) loans are emerging in the market. They currently represent less than 1% of loans but are gradually increasing as prices rise.

What is the most common loan term today?

Six-year (72-month) loans are now the most popular option. They account for 36.1% of all new vehicle financing according to recent data.

References

This article incorporates information from Edmunds and Bloomberg. Both sources provide authoritative data on automotive financing trends.