Benchmark Consulting International's Ted Brown: "One of the most significant things in this year's study was the willingness of automotive finance sources to book loans with longer terms."
Last year 45 percent of new-vehicle loans had terms of more than 60 months, according to the Consumer Bankers Association's annual automotive finance study. That's up from 40 percent in 2003.
"One of the most significant things in this year's study was the willingness of automotive finance sources to book loans with longer terms," says Ted Brown, auto finance practice manager of Benchmark Consulting International. The Atlanta company works with the bankers association to compile its study findings.
Just 21 percent of loans in 2000 had terms of more than 60 months, Brown says.
The study surveyed 49 lenders, including five captive finance companies. Participants completed online and written surveys in February 2005 about their business in 2004.
Noticing a trend
Paul Taylor, chief economist at the National Automobile Dealers Association, says he has seen a trend to longer vehicle loans for the past seven years.
Loan terms have increased because vehicles are increasingly durable, allowing buyers to keep them longer, Taylor says. Low interest rates also have contributed to longer loans, he adds.
"As rates rise, the length will probably be reduced by some financial institutions," Taylor says.
Longer loans indicate a stronger new-vehicle market, says Joanne Krell, a spokeswoman for General Motors Acceptance Corp. GMAC did not participate in this year's survey.
"It allows more people to get into more new products," Krell says. "It gives them more options in the marketplace."
More consumers also are making their loan payments on time, the study concludes.
Last year, consumer payments on 1.16 percent of study participants' loans were 30 days or more past due. In 2002, 2.5 percent of loans were delinquent.
On-time payments "seem to be a trend," Krell says. "We see that as indicative of a strong, quality portfolio."
Falling delinquency rates reflect a stronger economy that has put more Americans back to work, Taylor adds.
Vehicle leasing also increased last year, the study concludes. Participants said the average number of leases they wrote in 2004 was up 5 percent from 2003.
Before last year, Taylor says, leases as a percentage of new-vehicle sales had trended downward since the late 1990s.
Taylor says he expects leasing to increase over the next two years as rising interest rates make leasing more attractive.
Other findings of the bankers association study:
You may e-mail Gail Kachadourian at [email protected]