Nearly One in Four Car Buyers Extend Loan Terms by Two Years or More to Afford Payments

A new CDK Global study reveals that nearly one in four financed car buyers in the U.S. are extending their loan terms by at least two years to make monthly payments more manageable. The survey, conducted among over 1,000 car buyers in Q2, found that 41% had to adjust their loan terms to fit their budgets, with 19% adding 12 months, 11% adding two years, 6% extending by 36 months, 3% by 48 months, and 2% pushing terms beyond 49 months. Only 47% reported that their original loan terms fit comfortably within their budgets. While longer loan terms lower monthly payments, they significantly increase total interest paid and delay the point at which borrowers achieve positive equity in their vehicles. This trend underscores the financial strain on households amid rising living costs. The study also highlights the impact on dealers, as extended loan terms mean buyers take longer to return to the market for a new vehicle. Dealers are reportedly discussing the pros and cons of lengthy loan terms with customers more frequently. For those who lease, the situation is different. Only 6% of leaseholders needed to extend their terms to stay within budget, as leasing typically involves higher payments and appeals to buyers who prefer shorter-term arrangements or luxury vehicles. Instead, 37% of leaseholders have used manufacturer incentives or deals, another 37% increased their down payments, 11% negotiated lower sales prices, 6% sought higher residual values, and 1% targeted outgoing model-year vehicles to reduce costs.