Writer: Lucy Lazarony
Editor: Adam West
Reviewer: Ashley Fricker
Key Takeaways
- A record 31.3% of auto loans in August had terms longer than 72 months, while negative equity also rose.
- Down payments averaged 13% of vehicle prices, matching their lowest level in almost four years.
- Buyers can limit borrowing costs by considering a larger down payment and the shortest loan term they can afford.
Auto loans are getting easier to secure. But for many buyers, getting into a car now means taking on a longer loan or more debt.
Auto credit access rose for the fourth straight month in August, reaching its highest level since November 2015, according to Cox Automotive’s Dealertrack Credit Availability Index.
The overall loan approval rate rose to 73.9% in August, its highest level in 12 months, though it remained below its August 2025 level.
The subprime share of auto loans reached 16.6% in August, up 0.2 percentage points from July and 3 percentage points year over year. Cox Automotive said this reflects a change in the mix of loans, not an increase in the number of subprime loans from July.
Seven-Year Loans and Negative Equity Are on the Rise
There were more longer-term loans and more instances of negative equity, which occurs when a borrower owes more on a car than it is worth. The share of auto loans with terms longer than 72 months rose to 31.3% in August, a record high in Cox Automotive’s data.
Auto Loans Longer Than Six Years Hit a Record
Source: Cox Automotive, Dealertrack Credit Availability Index, August 2026.
Eighty-four-month, or seven-year, loans drove the increase in longer-term loans, Cox Automotive told us.
Cox Automotive’s reported share of loans with negative equity rose to 57.4%. Buyers who roll what they still owe on a trade-in into a new loan can start out owing more than the new car is worth. They could face a tough time if they need to sell it before paying down the balance.
Down Payments Remain Near a Four-Year Low
Some borrowers end up with negative equity because they make a small down payment. A larger down payment can reduce that risk, but Cox Automotive’s down payment figure was below 20% in August.
Down payments averaged 13% of vehicle prices in August, unchanged from July and matching October 2022 as the lowest level in almost four years, according to Cox Automotive.
How Buyers Can Keep Car Debt in Check
A smaller down payment and a longer-term loan might get you into the vehicle you want, but these upfront savings can also increase borrowing costs and the risk of ending up under water on your loan.
Consider making a larger down payment if you can afford it and taking on the shortest loan term with a monthly payment that fits your budget.
Edmunds recommends a 60-month auto loan if you can manage the payment. Extend that loan to seven years and you’ll generally have two more years of interest charges, along with two more years of monthly payments.
If you are wondering how much you can afford to spend on a new car payment each month, think 15%. Edmunds advises keeping the payment on a new car at no more than 15% of your monthly take-home pay.
Another thing to consider is your total monthly car budget, which includes gas, maintenance, insurance, and repairs as well as your car payment. Kelley Blue Book recommends keeping that budget below 20% of take-home pay.
Consider those guidelines when you are thinking about buying a car. They can help you choose one you can afford to own.
