A recent report from Experian highlights just how affordability challenges continue to influence consumer behavior in the vehicle financing market. As vehicle prices rise, buyers are increasingly opting for extended repayment periods to keep monthly costs in check, while refinancing activity gains momentum amid easing interest rates.
According to Experian’s State of the Automotive Finance Market Report for the first quarter of 2026, nearly 36% of new vehicle loans extended beyond six years, marking an increase from about 31% in the same period the previous year.
Loans stretching past 85 months also edged higher, climbing from roughly 3% to 3.3%.
Similar dynamics played out in the used vehicle segment, where loans exceeding six years rose to around 32% from 28.6% a year earlier, with ultra-long terms over 85 months showing modest growth.
Melinda Zabritski, Experian’s head of automotive financial insights, noted that persistent affordability pressures are driving these choices. Shoppers often favor larger, higher-priced models, prompting many to spread payments over longer durations to manage budgets effectively.
Average loan amounts reflected upward pressure on pricing. For new vehicles, the typical financed amount climbed by more than $2,100 year-over-year to reach approximately $43,925.
Monthly payments for these loans averaged $770, up from $748 previously. In the used market, loan sizes increased by about $785 to $27,070, while payments rose modestly from $523 to $531.
Despite these increases, nearly one in five new vehicle financings carried monthly payments below $500, suggesting some buyers successfully navigated lower-cost options.
Average loan terms stood at roughly 69.5 months for new vehicles and 67.7 months for used ones during the quarter.
Declining interest rates have opened opportunities for many borrowers to refinance existing loans.
In Q1 2026, refinancing typically reduced interest rates by an average of 2.2 percentage points, lowering the effective rate from 10.29% to 8.05%.
This translated into average monthly savings of $81 per borrower.
Credit unions dominated the refinancing space, handling over 63% of such activity—an increase from the prior year.
Refinances through credit unions delivered higher savings, averaging $101 monthly, compared to $60 for bank-led refinances.
This shift underscores how alternative lenders are playing a larger role in supporting consumer affordability.
The subprime borrower segment expanded notably, comprising nearly 16% of all vehicle financing in the quarter, up from 14.4% the year before.
Subprime shares grew in both new (to 6.9%) and used (to 20.6%) categories, indicating broader access to credit even as economic caution persists.
Lender market shares remained competitive, with banks leading at about 28.4%, followed closely by captive finance arms at 26.8% and credit unions at 20.1%.
Delinquency rates showed slight upticks, with 30-day delinquencies rising to 2% and 60-day figures to 0.86%, signaling mild increases in payment stress.
Powertrain preferences also shifted. Financing for new electric vehicles declined from nearly 11% to about 6.2%, while hybrid financing advanced from 12.1% to 14.9%, reflecting evolving consumer priorities around technology and costs.
Experian’s research findings now point to a market where relatively longer terms, strategic refinancing, and inclusive lending help sustain demand despite higher prices. Consumers and lenders are now said to be adapting to balance affordability with vehicle aspirations in an evolving digital economy.