Dealers are relying more on extended loan terms to keep new-vehicle sales moving as affordability pressures intensify, driving up negative equity on used-vehicle trade-ins, according to J.D. Power.
First things first: The company’s recent Automotive OEM Intelligence Report shows that 84- and 72-month loans continue to rise, underscoring how dealers and lenders are stretching payment timelines to offset higher vehicle prices.
In fact, loans of 84 months or longer now account for nearly 13% of new-vehicle financing, almost double their 2019 share.
Seventy-two-month loans now dominate the market, making up more than 40% of financed vehicle purchases.
Still, even with longer terms, monthly payments continue to climb, averaging about $806, with nearly one in five buyers paying more than $1,000 a month.
And some of the highest monthly payments are concentrated among premium and pickup-truck buyers.
Why it matters: Longer loan terms are helping sustain new-vehicle sales and keep deals together in a high-price environment, as more buyers look for ways to manage affordability pressures.
However, the rise in longer-term loans, while beneficial in the near term for both dealers and buyers, is creating trade-offs, most notably around trade-in equity, as highlighted in the J.D. Power report.
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The findings: Many customers trade in vehicles within three to five years, well before payoff, while loan terms now stretch six to seven years, leaving more buyers rolling unpaid balances into their next purchase.
Because unpaid balances are often rolled into new loans, longer terms are contributing to a cycle of compounding negative equity.
In 2025, 26% of used-vehicle trade-ins carried negative equity, up from 24% in 2024.
Buyers who financed new vehicles in 2022 will owe about $1,400 more after 48 months (when many are ready to trade) than buyers in 2021.
Also worth noting: Incentives have helped dealerships offset the trade-off of longer loans, with the average incentive per vehicle through March 2026 rising to $3,431, up $271 from March 2025.
What they’re saying: “While the auto and consumer financing industries still have plenty of tools at their disposal to keep this cycle going for the near-term, the extended buildup of longer-term loans, increased negative equity and liberal use of incentives could eventually create a day of reckoning where it is impossible to keep engineering a soft landing,” noted JD Power in a press statement emailed to CDG News.
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