Auto Loan Terms Extend at CUs: TransUnion.
Byline: David Morrison
The percentage of credit union auto loans with terms longer than 60 months rose by 15% from Q1 2010 to Q1 2015, according to TransUnion.
The Chicago-based consumer data firm also reported that 39% of credit union executives it surveyed said more than 50% of their auto loan originations carry terms longer than 60 months.
TransUnion revealed the data on credit unions and auto lending at its annual credit union seminar in Las Vegas Tuesday.
TransUnion Director of Research and Consulting for Financial Services Nidhi Verma contended that the longer loan terms represent both an increase in car prices and sharply lower interest rates that make these more expensive vehicles affordable to average credit union members.
"When you consider the way MSRPs [manufacturer's suggested retail prices] have advanced over the last few years, it's not surprising that loan terms have lengthened," Verma argued.
She also maintained that the longer terms actually drove much of the auto demand.
"These data points clearly show that greater loan lengths are one of the drivers of growth in the auto market," Verma added. "In the current low interest rate environment, longer loan durations allow consumers to buy new or used cars with lower monthly payments that fit within their budget. The increase in loan durations shows lenders are meeting those consumer needs."
She also pointed out that the longer loan terms reflect the reality that many cars are lasting longer, which has encouraged borrowers to consider financing their cars over the course of their cars' long lives.