Edmunds: Term Lengths Stretch to All-Time High in June
SANTA MONICA, Calif. ─ Car buyers are pulling all levers to keep their monthly payments manageable as vehicle prices continue to rise. In June, one of those levers, average new-vehicle finance terms, stretched to an all-time high of 69.3 months, according to Edmunds.
The average, which is up 6.8% from five years ago, was recorded during the same month the average amount financed registered its biggest uptick in 2017. It rose by $631 from May to $30,945. Also setting a new mark for the year was the average monthly payment, which rose from $510 in May to $517.
"Stretching out loan terms to secure a monthly payment they're comfortable with is becoming buyers' go-to way to get the cars they want, equipped the way they want them," said Edmunds Executive Director of Industry Analysis Jessica Caldwell. "It's financially risky, leaving borrowers exposed to being upside down on their vehicles for a large chunk of their loans, but it's also a sign that consumers are still confident enough in the economy to spend more on their vehicles and commit to paying for them longer."
Edmunds also reported that the average APR dipped just below 5% for the first time since February, averaging 4.96% in June. The APR has increased 5.7% from a year ago and 13.6% from five years ago.
On Monday, Kelley Blue Book reported that June’s average transaction price grew by $511 from a year ago to $34,442, which was slower than normal for the month of June. The average, however, remained relatively flat with May.
“Transaction prices grew more slowly than normal in June, increasing less than 2 percent,” said Kelley Blue Book analyst Tim Fleming. “As the industry enters a ‘post-peak’ environment for new-car sales, more pressure will be placed on transaction prices.”
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