American car buyers, attracted by new models and cheap financing, are taking out bigger auto loans and stretching out the terms of those loans to a new record length.
New analysis from Experian Automotive shows the average new car loan in the fourth quarter of last year was $26,691 and stretched out over an average of 65 months. The length of the average loan is one month longer than the previous record set in the third quarter of last year.
Experian said 4.1 million auto loans were written in the last quarter of 2012.
Heftier Loans, Pricier Models:
The average new auto loan increased by $272.00 and reached its highest total since the first quarter of 2008, according to Experian. The fact that Americans are financing a greater amount for new cars and trucks is due in large part to the automakers steadily raising prices and consumers adding new features to the models they are buying.
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The average transaction price for new models now tops $30,000 according to TrueCar.com.
New vehicle prices have been steadily increasing in recent years as automakers have pushed new technology—like in-car entertainment/communication systems to differentiate their models. At the same time, as more Americans look to stay connected behind the wheel they are showing a greater willingness to pay more for the latest technology.
More Subprime Borrowers:
As the economy has slowly improved, lenders are increasingly comfortable writing auto loans for those with subprime or weak credit ratings. In the fourth quarter, there was a 30.9 percent increase in the number of new vehicles sold to those with deep subprime credit scores under 550. Loans to those with subprime credit scores between 550 and 619 jumped 11.5 percent.
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Automakers and lenders noted the increase in subprime loans is normal and does not mean the industry is funding new car sales with shaky loans that will ultimately wind up in default. In fact, auto loan default rates have held in check over the last year.
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Still, 43.2 percent of new car loans in the fourth quarter were written for those with subprime credit scores, according to Experian. That is the highest percentage of new car loans going to subprime buyers since late 2007.
—By CNBC's Phil LeBeau; Follow him on Twitter @LeBeauCarNews
Questions? Comments? BehindTheWheel@cnbc.com
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