Car loans with seven-year terms are becoming more of the norm as consumers yearn for lower monthly payments.
That's according to Experian Automotive's latest State of the Automotive Finance Market report released Monday, which showed the average car loan term in the first quarter reached 66 months for the first time since the firm started publicly reporting data in 2006.
The analysis also showed that loans with terms extending out 73 to 84 months made up 24.9% of all new vehicle loans originated during the quarter, growing 27.6% since Q1 2013.
"As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level," said Melinda Zabritski, Experian Automotive's senior director of automotive credit.
While the benefit of a longer-term loan is the lower monthly payment, Zabritski said the flip side of that is consumers can find themselves paying more in interest or being upside-down on their loan if they seek to trade their vehicle in early.
Last spring, several other indicators, including Experian's, noted a growing trend in longer car loan terms, with some extending out as long as 97 months.
Meanwhile, 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, according to Experian.
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.
Overall, loans and leases for new vehicles were easier to obtain in Q1 2014, Experian discovered. 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.
"Over the last several quarters, leasing has come back as a very desirable option for consumers," Zabritski said. "Whether they are interested in getting the latest and greatest models or simply do not want to commit to a long-term purchase, consumers are leasing new vehicles in greater numbers than ever before."
Subprime financing rose for new vehicles and dropped for used vehicles during the first quarter, according to Experian.
Market share for nonprime, subprime and deep subprime new vehicle loans rose slightly in Q1 2014 to 34.34% from 33.68% in Q1 2013.
For used vehicles, nonprime, subprime and deep subprime loans accounted for 64.2% of all loans, down 2.6 % from 65.91% in Q1 2013.
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