As Car Prices Get Higher, Auto Loans Get Longer, And Longer — And Longer

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As Car Prices Get Higher, Auto Loans Get Longer, And Longer — And Longer
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Borrowers are trying hard as ever, to offset record high prices for new vehicles, by spreading their loans over longer terms.

A longer term produces a lower monthly payment compared with the same amount over a shorter term., which recently reported detailed auto finance results for the fourth quarter of 2021, auto loan terms of 73 to 84 months accounted for 33.1% of new-vehicle loans, up from 30.1% a year earlier. That’s a big change, in only one year. Two years ago, it was 29.7%.

The average new vehicle loan amount increased 12% year-over-year, to $39,721 in Q4 2022, from $35,421 in Q4 2020, Experian said.used vehicle monthly paymentLonger terms also carry a couple of downsides for the borrower. First, in return for a lower monthly payment, assuming the same interest rate, the borrower pays more interest over the life of the loan.

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