The retail automotive industry has been riding a five year high with average 8.30 percent year-over-year increase in unit sales from 2011 to 2015 according to data from Wards Auto. With the rapid pace of automotive industry growth lending requirements loosened, longer term loans became the norm and more customers who had been holding off on purchasing a vehicle returned to dealerships.
Just like within any economic cycle, after a period of expansion, the pendulum swings to a period of economic reduction. And, everyone is avidly watching the signs to see when that pendulum will start to swing.
Experian’s latest State of Automotive Finance Market Report listed average new vehicle loan terms increased to 67 months in 2015, while used vehicle loan terms increased to 63 months. This has resulted in a significant growth of negative equity on car notes.