Posted on: 01/13/2017

“Overall, credit availability should continue to be a big positive factor for U.S. auto sales in 2017,” said Tom Webb, chief economist for Manheim Consulting.

One problem facing the auto loan industry is the huge increase in the number of new-vehicle purchases where the buyer has a negative equity on the trade-in. A record high of 32% of new-vehicle purchases had negative equity in the first three-quarters of 2016. Negative equity is where the buyer owes more on the remaining contract balance than the value of the vehicle.

Data from Edmunds found the average amount of negative equity is about $4,800. When that amount is added to the new purchase there are reasons for concern by lenders. For instance, used-vehicle prices can drop and there is less value but a larger amount owing.

Additionally, Experian Automotive reported the average new-vehicle loan was 68 months in the third quarter, up from 67 months a year ago. And 73 to 84 month loans were the fastest growing new-vehicle loan of all segments in the third quarter of 2016.