WASHINGTON, September 15 — The average new car loan in the United States stretched to 69.7 months in 2023, up from 62 months a decade earlier, and the share of loans running 84 months or longer has more than doubled, from about 10% in 2013 to over 20% in 2023, according to Edmunds data. The bottom line: buyers are spreading payments over longer stretches to keep monthly costs down, and the total cost of borrowing is climbing as a result.
Loans reaching 100 months — eight years and four months — remain a small fraction of the market but are increasingly offered by some lenders and dealers, particularly for luxury vehicles and electric cars. Consumer finance experts warn that extended terms carry real risk, chiefly negative equity, the condition in which a borrower owes more than the vehicle is worth.
That makes selling or trading in the car difficult, and if the remaining balance is rolled into a new loan, monthly payments on the next vehicle rise.
The arithmetic of a longer loan
The Consumer Financial Protection Bureau has noted that longer-term loans often carry higher interest rates and increase the total cost of borrowing. A $35,000 loan at 7% APR over 60 months costs about $693 per month and $41,580 in total payments. Stretched over 100 months, the same loan costs about $406 per month but $48,720 in total payments — an increase of over $7,000.
Auto loan debt in the U.S. surpassed $1.5 trillion in 2023, according to the Federal Reserve, with delinquency rates rising, particularly among subprime borrowers. The average interest rate for a new car loan was around 7.4% in the fourth quarter of 2023, Edmunds reported, up from 4.1% in early 2022.
For used cars, the average rate was about 11.6%. Higher rates combined with longer terms mean consumers pay significantly more over the life of the loan. Industry analysts attribute the trend toward longer loans to rising vehicle prices.
The average transaction price for a new car in the U.S. was about $48,000 in 2023, according to Kelley Blue Book, up from $38,000 in 2019. As prices have risen, lenders have extended terms to keep monthly payments affordable.
Regulators and the industry weigh in
The CFPB has taken action against lenders for unfair practices related to auto loans, including a case in 2023 against a lender for failing to properly disclose loan terms. Consumer advocates recommend that borrowers consider the total cost of the loan, not just the monthly payment, and avoid terms longer than 60 months if possible. They also advise making a substantial down payment and considering gap insurance to protect against negative equity.
The National Automobile Dealers Association has stated that longer terms can be beneficial for some buyers who plan to keep their vehicles for many years, but acknowledges the risks. As auto loan debt continues to grow, the trend toward longer terms is likely to persist.
The figure that matters for borrowers weighing a 100-month offer is not the monthly payment but the total — and on the CFPB’s example, that gap runs past $7,000.
