Stretching to Afford: Seven-Year Car Loans are Becoming the New Normal

More than 22% of new car buyers took out loans lasting seven years or longer in Q2 2025 — a record share, according to new data from Edmunds. And nearly 20% of those buyers agreed to monthly payments topping $1,000.

The 84-month car loan, once considered a desperate last resort, is now a go-to tool for affordability. The trend points to a riskier, more stretched subprime auto lending environment — with greater potential for defaults, regulatory scrutiny, and tightening credit standards ahead.

This shift toward longer auto loan terms — an increase of 17.6% from 2024 — isn’t happening in a vacuum. Car prices remain stubbornly high, averaging $48,799 in May 2025, up 2.1% year-over-year.

To make matters worse, average APRs hover around 7.2%, and 0% financing deals have nearly disappeared — down to just 0.9% of loans in Q2, the lowest share since 2004.

The average amount financed stood at a record $42,388. All told, Americans now owe more than $1.64 trillion in auto debt.

Subprime lenders should take particular notice. Long loan terms combined with high rates, low down payments, and inflated vehicle prices are a recipe for negative equity.

Borrowers are now more likely to owe more than the car is worth — especially early in the loan term — leaving lenders holding the bag if a borrower defaults. 

Rising delinquencies add to the concern. As of January 2025, 60-day delinquencies among subprime borrowers reached 6.56%, their highest level since the 1990s. While some data from Experian in early 2025 shows a slight dip in 30-day delinquencies, longer-term metrics remain elevated.

Longer loan terms alter the makeup of lenders’ portfolios. Payments become ever more spread out, and risk modeling becomes harder.

Lenders need to reengineer underwriting procedures by considering how quickly vehicles depreciate and how much danger that represents. Long terms, together with minimal down payments and poor credit, make this class of loans especially risky.

Beyond the outright impact on lenders and borrowers, this trend may trigger something bigger about debt in consumers’ minds. Standardization of egregious loan terms and astronomical monthly payments means that many households are under pressure — paying for vehicles as well as juggling other types of credit. 

As more income is diverted into auto payments, spending habits and emergency funds may be impacted. This pull can depress broader macroeconomic momentum and entrap more families in financial distress.

Regulators will have hard questions if rising levels of default build up in conjunction with longer maturities.

For subprime lenders, that means pressure in scrutinizing their compliance systems — most especially regarding affordability reviews, disclosures to borrowers, and what they do regarding collections.

“While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks,” said Edmunds analyst Joseph Yoon. That includes increased upkeep costs and the risk of being underwater if the car is traded in before it’s paid off.

Some subprime lenders may respond by tightening the spigot — limiting longer-than-average loans to borrowers with better credit. Others may charge larger down payments or require safer loan-to-value ratios. Leasing can be a short-term option for consumers with risky credit. 

The surge in 84-month loans is not just a matter of stretching dollars — but has to do with economywide fundamentals. If lenders do not react, then they may take on more delinquent loans, impaired collateral, and escalating losses.