The 72-month loan is falling out of favor. With loan defaults rising, risk-averse lenders are backing away from the ultralong-term loans that once enticed consumers.
From Jan. 1 through March 15, 2009, 40.5 percent of car loans made through dealerships had terms of 72 months or more, reports the Power Information Network. That's down from 2008, when for the year 41.7 percent of the loans had terms of 72 months or more.
And it's down significantly since 2006, when such loans peaked at 44.3 percent of total loans.
Dealers and lenders have promoted extended loan terms to entice consumers into another vehicle with low monthly payments. But the gimmick is not without risk, and the credit crisis makes it more perilous.
In a climate where delinquencies and defaults are rising, lenders say their greatest losses are on loans with maturities of 72 months or more.
And dealers say extending the loan term kills future car deals. The practice lengthens the time it takes customers to build enough equity to trade in their vehicles.
"You need those longer loans to get deals done, but it really affects customer retention," says Pete DeLongchamps, a vice president of the Group 1 Automotive Inc. retail group in Houston. "Ideally, you would like to have all your customers driving cars under warranty. Customer retention rates outside warranty terms are substantially less."