Longer car loans gain popularity

NEW YORK — Just as the once-rare 40-year mortgage is enjoying a surge in popularity, U.S. consumers are increasingly opting for auto loans that let them lower monthly payments by spreading them out over longer periods of time.

Last year, for the first time, the majority of auto loans were underwritten for five years or longer, according to a study by the Consumer Bankers Association. The percentage of new car loans of more than 60 months jumped to 55 percent of the total in 2005, from 45 percent in 2004. The percentage of new auto loans with terms of five years or more has more than doubled since 2001.

People buying used cars are somewhat less likely to take out a longer loan; those with terms of five years or more accounted for 40 percent in 2005.

Just how long are the longest loans? The study found the maximum maturity on new car loans averaged 77 months in 2005, unchanged from 2004.

It appears that borrowers are using these loans to buy cars and trucks they otherwise might not be able to afford: the size of the average new vehicle loan rose by 4 percent last year to $23,534, from $22,638 in 2004, according to the study. The size of the average used vehicle loan size also rose by 3 percent to $16,419, from $15,961.

Consumers may be stretching their finances, auto loans are still performing well. The percentage of new vehicle loans with payments greater than 30 days past due fell in 2005.