COSTA MESA, Calif. (6/3/14)--While the housing market has remained sluggish in recent months, auto loans have boomed, as buyers borrowed at a record pace in the first quarter, according to a report by Experian Automotive (CNBC.com June 2).
The average monthly payment on a car loan jumped to $474 during the quarter, an all-time high, while the percentage of long-term loans with payment terms between six and seven years is also the highest it's ever been.
Nearly a quarter of all auto loans now fall into the long-term category.
"I'm not surprised consumers are borrowing more or taking out longer auto loans," said Melinda Zabritski of Experian Automotive (CNBC.com). "With relatively low interest rates, buyers are more comfortable taking out longer loans so they can keep their monthly payment as low as possible."
Also to post record highs for the quarter: the total amount of auto loans in the United States ($100.7 billion); the average length of loan term (5 1/2 years); and the average auto loan amount, which climbed $964 to $27,612.
"Consumers are really relying on financing as the price of new vehicles continues to move higher," Zabritski said.
Consumers may be more willing to take out longer-term loans because they're confident they'll hold on to the vehicle longer than they have in the past. The average length of ownership, according to IHS Automotive, has risen to six years and one month, which is nearly two years longer than levels seen a decade ago.
Meanwhile, increases in automobile prices have driven consumers to pursue leases where monthly payments tend to be lower over several years as well (CNBC.com).
For example, the average monthly payment for those buying a Honda Civic in the first quarter was $347, according to Experian's numbers. The average monthly lease payment for a Civic was $251, nearly a $100 drop-off.