Rising car prices push Americans toward longer auto loans

Nearly half of American auto loan borrowers are relying on terms longer than 72 months to manage monthly payments.

On the Dash:

• Nearly 50% of borrowers rely on auto loans longer than 72 months to manage rising vehicle costs.
• Millennials and Gen X carry the largest balances, while Gen Z faces the highest interest rates.
• Monthly payments and interest burdens vary by generation, with Gen Z spending the largest income share on loans.

As the average transaction price for new vehicles exceeds $50,000, more Americans are finding vehicle ownership increasingly costly, leading many buyers to take on larger or longer auto loans.

Nearly half of U.S. auto loan borrowers rely on terms longer than 72 months, according to a recent LendingTree analysis. The trend aims to keep monthly payments manageable amid soaring vehicle costs. Extended terms help lower monthly payments but increase total interest paid over the life of a loan.

Sign up for CBT News’ daily newsletter and get the latest industry stories delivered straight to your inbox.

Auto loan burdens vary sharply by generation. Millennials and Gen Xers carry the largest average balances at $22,627 and $22,514, respectively. Baby boomers average $20,632, while Gen Z borrowers have the smallest average balance at $20,241. Despite smaller balances, Gen Z faces the highest average interest rate at 13.0%, resulting in an estimated $9,773 in interest paid on their loans. Millennials have the highest total interest paid at $10,531.

Monthly payments also differ. Gen Xers have the highest average monthly payments at $594, followed closely by millennials at $589. Gen Z borrowers average $522 per month, while baby boomers average $554 per month. Payment size relative to income varies significantly, with Gen Z allocating 13.4% of monthly household income to auto loans, the highest of any generation.

Long-term loans are more common among older borrowers. 53% of Gen Xers and 50.9% of millennials have loans exceeding 72 months, compared with 40% of Gen Zers and 48% of baby boomers. A smaller share of loans is over 7 years old, with millennials leading at 8%. Nearly 1 in 10 Gen X borrowers have monthly payments of $1,000 or more, the highest share among the generations studied.

As vehicles remain expensive and loans grow longer, financial planning and careful budgeting are critical for consumers. Extended-term loans and rising interest rates highlight the pressure buyers face navigating the new-vehicle market.