Rising auto prices may be a contributing reason why a record number of consumers are going into longer car loans.
According to market research by J. D. Power and Associates, nearly one-third (32 percent) of car buyers taking out loans this month opted for 72-month terms. This is up some 30 percent from the same period one year ago.
The typical car purchase for which a consumer takes out a loan is $28,504 so far this month, up 3 percent from March 2012.
As reported in the Los Angeles Times, John Humphrey, senior vice president of J. D. Power and Associates’ global automotive practice, said that consumers who may have been shut out of the market in recent years may find that a longer loan period makes buying a vehicle more affordable.
As previously reported here, other reasons why consumers may be more willing to sign on the dotted line for a new car purchase include the average age of vehicles hovering around 11 years, which may signal pent-up demand, along with better credit availability, a number of new vehicles being introduced, improving employment numbers and an improvement in home values.
The J.D. Power research also pointed out another trend, that of shorter-term transactions. The typical 36-month lease contract, according to J.D. Power data, will account for 23 percent of auto sales this month, up 3 percent from 20 percent in March 2012.
(c) 2013, High Gear Media.