Americans are taking out longer auto loans than ever to stretch the costs and create cheaper monthly payments.
US car buyers helped the industry meet a milestone last month, albeit an unsettling one.
In March 2020, the average auto loan's term surpassed 70 months, according to new data Edmunds released on Wednesday. Car buyers have been well on their way to the milestone since 72-month and even 84-month financing emerged for new vehicles in recent years. Data shows in March 2015, the average loan term was already 67 months, and just last year, it rose to 69 months.
The longer terms correlate directly with new car prices; the average cost of a new car has risen dramatically in recent years, especially as automaker push more profitable SUVs and trucks. In March 2020, the average amount financed clocked in at $34,052 after an average down payment of $4,008.Five years ago, the average amount financed was under $30,000. That left the average new car payment at $573 per month, up $20 from last year. The average car buyer paid about $38,000 for a new car.
It's worth noting APRs dropped slightly compared to March 2019. The data shows 5.8% was the average rate last month, compared to 6.4% at the same time last year. More buyers also took advantage of 0% financing as more automakers pull out all the tools in their chest to drive sales amid the coronavirus outbreak. Almost 5% of car buyers received a 0% financing deal last month.
On the other end of the spectrum, the number of car buyers who purchased a vehicle with APRs of 10% or higher also jumped in March. In total, 13% of car buyers received an APR of at least 10%, up from 11% in February. Edmunds suggested most of the cars purchased in March were likely need-based, especially toward the end of the month.