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Loan, lease terms increase in ’05

November 18, 2010
9% exceed 6 years

Vehicle loan and lease terms continue to lengthen, with repayment periods of 60 months or longer representing 55 percent of new-vehicle loans written in 2005, according to a retail banking group.


The 2006 Automobile Finance Study, conducted by the Consumer Bankers Association (CBA), also found that the average new-vehicle loan last year increased 4 percent over 2004, to $23,534, while the average used-vehicle loan rose 3 percent, to $16,419. 

New-car loan maturities longer than five years jumped from 45 percent in 2004 and now account for the highest percentage of all term categories for new loans. Such loans comprised 22 percent of lending in 2000. Six-year loans in 2005 comprised 46 percent of lending, with 9 percent of loans even longer.


While consumers may prefer longer loan terms, the CBA survey shows that the lowest rates, at about 5.5 percent, were available for terms of four years or less, compared to rates approaching 7 percent for loans longer than five years. 

The average amount financed was 95 percent of invoice, or 90 percent of MSRP.


Average new- and used-vehicle loan delinquencies continued a four-year declining trend. Average new-vehicle dollar delinquencies in 2005 fell to 0.87 percent compared to 0.97 percent in 2004, and average new-vehicle account delinquencies fell to 1.08 percent from 1.16 percent. 

Used-vehicle delinquent dollars averaged 1.36 percent in 2005, down from 1.66 percent the previous year, while 1.95 percent of used vehicle loan accounts were delinquent, compared to 2.10 percent in 2004.


On a combined (new- and used-vehicle) basis, gross chargeoffs increased last year to 1.19 percent from 0.98 percent, while combined net charge-offs stayed relatively even at 0.77 percent. Recovery rates were up slightly to 31 percent last year.  

Credit quality, as defined by average credit scores for new- and used-vehicle loans, decreased slightly to 716 from 722 in 2004.  Nearly three-quarters of scores were 680 or higher.


The CBA’s annual survey covers indirect lending, leasing and floorplan finance.