✎ Contributed by Ty Griffin
A record share of new-car buyers is taking out longer loans as elevated vehicle prices and borrowing costs push monthly payments higher. Edmunds reported that 25.5% of financed new-vehicle purchases during the third quarter carried terms of at least 84 months, up from 21.8% a year earlier.
The average amount financed reached a record $44,664, while the average monthly payment climbed to $787. More than one-fifth of financed purchases carried payments of at least $1,000 per month, and borrowers were expected to pay an average of $9,938 in interest over the life of their loans. Longer terms also increase the risk that owners will owe more than their vehicles are worth as depreciation outpaces loan repayment.
Market Reaction
- Ally Financial Inc. (NYSE: ALLY): $37.88, up $0.25 (0.66%)
- Capital One Financial Corp. (NYSE: COF): $197.74, up $2.68 (1.38%)
- General Motors Co. (NYSE: GM): $81.61, up $1.33 (1.66%)
- Ford Motor Co. (NYSE: F): $12.16, up $0.0100 (0.082%)
- CarMax Inc. (NYSE: KMX): $55.68, up $0.83 (1.51%)
Investor Sentiment
Shares of major auto lenders, manufacturers and retailers moved higher despite mounting affordability concerns. Longer loan terms can support vehicle sales by reducing the immediate monthly burden, but they may also increase credit risk for lenders such as Ally Financial and Capital One if borrowers become stretched by inflation, high fuel costs and weakening household finances.
For General Motors, Ford and CarMax, rising payments could push buyers toward less expensive models, used vehicles or delayed purchases. Investors will monitor delinquency rates, lending standards, incentives and vehicle prices for signs that consumer credit strain is beginning to weigh on demand across the automotive market.
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