With new (and used) vehicle pricing increasing substantially during the pandemic, coupled with rising interest rates and a low inventory/high demand sort of situation, we’ve also seen average new vehicle monthly payments continue to rise to new heights, too. In fact, the average new vehicle payment consumers are shelling out has risen to new record highs on more than one occasion over the past few years, and there doesn’t appear to be much relief in sight, either. As such, Ford customers are increasingly gravitating toward longer loan terms to lower those monthly payments, a fact that the automaker is clearly aware of.
“We see customers doing what they can to afford a new vehicle. I mean, we’ve seen 84-month financing increases as a share of our offers on the financing side,” Ford CEO Jim Farley stated during the automaker’s Q1 2025 earnings call with investors. “Natural levels are well within the bounds of the industry, but customers are doing what they need to adjust for their payments.”
As Ford Authority previously reported, 19.8 percent of new car buyers opted for an 84-month loan in Q1 2025, which is a new record high, as well as a significant jump from 13.4 percent in Q1 2019. Meanwhile, 60-75 month loans accounted for 67.4 percent of all new vehicle financing over the first quarter, down from 68.9 percent in Q1 2024, while 48 month or less terms made up 10.2 percent of loans over the same time period – down from 11.9 percent in Q1 2024.
Additionally, 18.9 percent of all new car buyers in Q4 2024 took on loans with monthly payments north of $1,000 – an all-time high. The average amount consumers financed over the final quarter of the year was $42,113 – another record – and much higher than the $40,713 they shelled out in Q3 2024, as well as $39,977 the year prior. Just 2.4 percent of all new financed vehicle purchases in Q3 were zero percent deals, and making matters worse, interest rates remain quite high – 6.8 percent in Q4, though that is a bit lower than Q3, when they came in at 7.1 percent.
Comments
Go into debt for 8 to 10 years on a depreciating asset. You can’t teach stupid. If your car payment is more than 15% of your monthly income you have no business buying a new car. Get smart and buy a three year old off lease vehicle.
More loan defaults coming
For sure!
I planned to purchase a 2024 RII hybrid Nautilus with a finance rate of 3.9 for 48 months. Due to a factory recall they could not sell it when I went to pick it up after driving four hours. They made a killer deal on the spot for a 2025 RIII hybrid Nautilus. However, the finance rate for the same amount was $900 more since the 2025 model interest rate was 4.9 for 48. I just paid off a 2.9 loan for 60 months on a 2020 F-150. I think I’ll keep it since it only has 9500 miles.
It’s only money, just buy it!
Two thoughts…if you take a 7 year lease or loan, you are gambling that the vehicle will hold up ok because for a long portion of that time it will be out of warranty. With Ford’s QC problems, it doesn’t sound like a good bet. Second, as Ronald said above, if people have to stretch so long to afford a vehicle it sounds as if they don’t have a financial cushion and this time are betting that they won’t hit any financial turbulence. Risky bet.
Can you imagine the total cost of the vehicle with 7 years of interest on it?
I have 0% for 60 on a 21 Edge. I’m holding out hope they do 0% on Explorers for Memorial Day so I can pass this on to my mom. Otherwise I will just keep driving the Edge 🤷♂️
The huge prices are forcing people to rethink vehicle buying decisions. Looks like 84 months will be the new “48 month” model many of us grew up on. This could evolve into a 120-month cycle before too long on higher priced vehicles. Not sustainable unless you plan to sell less vehicles.