More new car buyers resorted to 84-month loan financing terms

More car-buyers used seven-year loans to finance new vehicles in the first quarter as they continued to struggle with affordability, according to a recently released report.

Edmunds said last week that it found 84-month loans accounted for 19.8% of new-vehicle financing in the first three months of 2025. 

The proportion of seven-year loans for new vehicles in the first quarter jumped four percentage points year over year, according to the report. Compared to the first three months of 2019, such new-vehicle financing has surged 6.4 percentage points.

Edmunds also noted Q1’s 19.8% figure marked an “all-time high” for 84-month loans on new vehicles.  

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“The auto finance market showed signs of steadiness in Q1, but that stability doesn’t mean affordability has improved,” Edmunds Head of Insights Jessica Caldwell said in a press release. “When one in five new-car buyers are taking on seven-year loans, it’s clear how many consumers are still financially stretched. Even with rates holding relatively flat, the continued reliance on extended terms and high monthly payments reveals how challenging car buying remains.” 

In the first quarter, 10.2% of those that financed new vehicles agreed to loans of four years or less, something Edmunds linked to “well-qualified buyers capitalizing on incentives tied to shorter terms.”

The report also observed a year-over-year decline in new-vehicle financing loans with 60- to 75-month terms in the first quarter that it said signaled a “broader shift as consumers increasingly stretch or shorten loan terms to meet their financial goals.” Their share went from 69.7% in 2024’s first quarter to 67.4%. 

The average loan term for new vehicles was 69.5 months in the first quarter, with new-car buyers typically on the hook for a monthly payment of $741, according to Edmunds. It also found the average new-vehicle annual percentage rate came in at 7.1%. 

For roughly 17.7% of new-car buyers in the first quarter, they faced monthly payments of upwards of $1,000, Edmunds reported.

Caldwell said “there’s a risk” that the Trump administration’s auto tariffs “will add fuel to the fire” for affordability issues for car buyers, “triggering a disruption that could push vehicles even further out of reach for many shoppers.” 

President Donald Trump announced tariffs on imported passenger vehicles, light trucks and certain key auto parts late last month, amounting to 25%. The levy targeting vehicles and trucks came into force on April 3, the same day that Edmunds released its report. 

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Some economists and financial analysts have said Trump’s vehicle and auto parts tariffs could push up the prices of vehicles by thousands of dollars.

While unveiling the auto tariffs in late March, Trump indicated he wanted to make it so that people can deduct auto loan interest payments on American-made vehicles from their taxes. He also mentioned such a proposal earlier that month during his joint address to Congress.

President Donald Trump (Kevin Dietsch/Getty Images)

That, according to Caldwell, could “provide real relief to consumers, especially with total interest paid on a new-vehicle loan amounting to what could otherwise be used toward a home renovation project or vacation.” 

“But there are still a lot of unanswered questions from how ‘American-made’ would be defined to how this would be implemented and who would qualify,” she said in the press release. “Until those details are clarified, it’s hard to gauge how much effect a policy like this could have on the market.” 

Americans with financed new vehicles forked over $9,231 in interest on average in the first quarter, according to Edmunds. 

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The car shopping guide predicated in late March that the U.S. would see a total of over 3.8 million new vehicle sales in the first quarter. 

Cox Automotive reported Monday that its initial estimate for the average transaction price of new vehicles was $47,448 in March.