Honda Exec: Longer-Term Loans May Hurt Consumers, Not Help | Auto Finance News | Auto Finance News

Honda Exec: Longer-Term Loans May Hurt Consumers, Not Help

measure tapeThe growing popularity of longer-term loans aided last year’s record breaking 17.5 million cars sold – and that might not be a good thing, American Honda Motor Co.’s Executive Vice President John Mendel said yesterday at the Automotive News World Congress conference in Detroit.

“When auto loans stretch too far, to 84 or 96 months — some longer than the average marriage in the U.S. and double what they were 20 years ago — the impact is pretty significant for our business,” Mendel said, according to a published report.

About a third of auto loans in the U.S. have terms longer than 72 months currently, a marketshare that could go as high as 60% in the next few years, Mendel said.

The number of consumers trading in vehicles with negative equity hit 32% in the first three quarters of 2016 — a record high — according to data from Edmunds.com. That number was up from 30% during the same period a year prior, while the average negative equity on the vehicles also rose to a record high average of $4,832. The lowest underwater percentage on record was 13.9% during the great recession when credit was tight.

Mendel was also critical of other manufacturers’ fleet sales made to governments and car rental companies at a discount, which weakens resale values for consumers paying full price.

“I’m not saying there’s not profitable fleet sales, but profitable for whom?’’ Mendel said. “It’s certainly not for the customer.’’

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  1. […] Fargo & Co., Honda Financial Services, and Consumer Portfolio Services recently signaled they’re pulling back on 72-month loan terms, […]