According to new research, more people are taking out loans for autos that last beyond six years due to the rise in automobile prices.  

Credit monitoring service Experian, which analyzes new and used vehicle loans, says more than a third of all new vehicles bought in the fourth quarter were financed with loans that have terms of 6½, seven or even 7½ years.  

One way that auto buyers try to counter the rise in prices for new and used vehicles is by offering longer terms.  

Experian senior director of automotive finance solutions Melinda Zabritski stated that “the increase (in loan amounts), is not only attributed to inventor shortages but it’s also partly due consumers buying larger vehicles.”

The average vehicle loan amount was $39,721, which is an unprecedented high. This increase of $4,300 in the fourth quarter was compared to the 2020 period. While many consumers are trying to cut their monthly payments, they have also taken out longer-term loans to make them more affordable. However, average monthly payments rose $65 to $644.

These numbers show that strong demand has driven auto prices higher, despite low inventories. After the fourth quarter earnings report by AutoNation, Mike Manley, CEO of AutoNation said that he believes you’re seeing the overall lift due to the substantial discounting in 2018 & 2019. 

New vehicles aren’t the only ones that have higher loan amounts or monthly payments. Experian claims that the record-breaking fourth quarter average amount of used vehicles borrowed was $27.291, a 20% increase. Experian says the monthly average loan payment now stands at $488.