The risk from packaging more auto loans with terms of 72, 84 or 96 months into auto asset-backed securitization deals is specific to each issuer.
To mitigate risk, some lenders reserve loan terms longer than 72 months for high-FICO, low loan-to-value borrowers, which controls the frequency at which those loans are packaged into auto asset-backed securitization (ABS) deals and contains severity of losses, Deepika Kothari, associate managing director of consumer ABS at Moody’s Ratings, told Auto Finance News.
“Having a longer-term loan on a vehicle that depreciates rapidly is incrementally going to add to some risk, all else being equal,” Kothari said. “But all else is not equal here, because the credit is relatively stronger.”
Auto loans with terms of 73 to 84 months represented 16% of the dollar amount of prime auto loans securitized in 2025, according to S&P Global data. Eighteen of 27 prime issuers included 76- to 84-month auto loans in deals, with the credit unions having the highest concentration of these loans, S&P Global director Steve Martinez told AFN.
“We have seen loan terms increase, and the prevalence is on those credit unions,” he said.
2026 issuances
A higher concentration of longer loan terms was reflected in some credit unions’ 2026 issuances, according to S&P Global presale reports, including:
- Space Coast Credit Union’s $400 million prime ABS deal in April, in which the percentage of loans with original terms of 76 to 84 months rose to 66.16% from 60.79% in its previous issuance in July 2025; and
- First Community Credit Union’s $316 million prime ABS deal in February, in which 9.98% of loans had an original term of 85 to 96 months. FCCU’s previous ABS deal in May 2025 did not include 85- to 96-month loans.
Risks tied to longer-term loans hinge heavily on issuers’ underwriting standards, Amy Martin, managing director and sector lead for U.S. ABS at S&P Global, told AFN. For example, some lenders only originated 84-month auto loans to a select customer base when they first rolled out the term, she said.
“As they widened it to a larger segment of their customer base, the credit standards moderated a bit,” Martin said.
Outcome of high vehicle prices
The inclusion of longer-term loans in ABS issuances isn’t new, but it is a function of the average price of a new vehicle rising to about $50,000 in 2026, Bobby Jorgensen, vice president and senior analyst of consumer ABS at Moody’s, told AFN.
“The motivating factor behind it [is] to make the monthly payment more affordable for the borrower,” he said.
Captives tend to be more traditional with preference for originating and including five- to six-year loans in ABS deals, Jorgensen said. At the same time, some credit unions working with nonprime consumers skew toward originating 72-month loans or longer, given that those borrowers have less room to budge on monthly payments, he said.
“We’ve seen credit unions have tended to have a little bit higher concentration [of longer terms],” Jorgensen said.
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