Brien Joyce
Vice President
EFG Companies
Remember when you were shocked that average loan terms had increased to 62 months, then 68 months and so on? While the industry is no longer shocked by loan terms that last more than five years, lenders are now grappling with the reality that their borrowers are up-side-down on their loans for much longer periods of time while still making record-high loan payments.
According to Experian’s latest State of the Auto Finance Market report, the average new vehicle payment increased to $506 in Q4 2016, with an average loan term of 68 months and an average amount financed of $30,621.
Within 68 months, what do you think is the likelihood of a consumer experiencing something that would affect their ability to make their auto loan payment? Maybe their car breaks down or they lose their job. Your algorithms can probably tell you that the likelihood is pretty high. That’s why Experian has seen 60-day delinquencies rise in almost every State of the Auto Finance Market report issued in the past few years.