Loan terms have been inching upward as consumers struggle to make car payments fit into their tightening budgets. For the past few years, average maturities have hovered around 63 months, according to Federal Reserve data.
But the Fed’s most recent G19 report, released Monday, shows that in July, the average maturity among auto finance companies jumped to 67.2 months. In the month prior it was 63.5 month – nearly a four-month increase.
I did a quick search of historical loan maturities from the G19 report, and it appears that there were only two other times the average fluctuated that much. Here’s what I found:
• In August 1986, the average loan term was 50.4 months. It clocked in at 44.5 months in September and 45.3 months in October, then rebounded to 53.4 months in November.
• In February 2002, the average maturity was 56.5 months, a 7.2 month increase from the previous month.
In both of those cases, the average term continued climbing from the new, higher number, so that’s what I expect will happen here, too.
Lenders have certainly taken notice of extended loan terms in their own portfolios, but most of those I’ve spoken to about it have said there’s little they can do. Consumers are either too upside-down in their existing loans or too cash-strapped to buy vehicles any other way.
