Long‑term loans and EV residual risk
Dealers report rising demand for 72‑plus month auto loans as cash‑strained buyers stretch payments, which increases negative equity risk in portfolios (x.com). At the same time, lenders are shrinking exposure to EV residual volatility in asset‑backed securitisations, tightening how they finance electrified inventory (x.com).
Longer car loans are spreading again, just as lenders trim how much electric-vehicle risk they package into bond deals. (autofinancenews.net) Auto Finance News reported April 10 that loans of 72 months or longer reached nearly 30% of originations in March. The same report said United States Bank has seen a modest increase in 84-month loans in recent months. (autofinancenews.net) Experian said the average new-car loan term was 68.94 months in the fourth quarter of 2025, and the average used-car loan term was 67.68 months. Its fourth-quarter report also said total subprime share rose to 16.86%, the highest level since 2020. (experian.com, experian.com) A long loan cuts the monthly bill by spreading the same price over more months, but it also slows how fast the balance falls. If the car loses value faster than the loan balance drops, the borrower can end up owing more than the trade-in is worth. (experian.com, cnbc.com) That gap is already large in the broader market. CNBC reported that 30.5% of buyers with a trade-in were underwater in March, citing J.D. Power, and Edmunds said the average negative equity on those trade-ins hit a record $7,214 in the fourth quarter of 2025. (cnbc.com) Electric vehicles add a second problem for lenders: the car’s future resale value, or residual, has been moving around more than for gasoline models. Auto Finance News reported April 10 that some lenders may further reduce battery-electric leases in auto asset-backed securitizations in 2026 and 2027. (autofinancenews.net) In those securitizations, lenders bundle loans or leases and sell bonds backed by the cash flow. Auto Finance News said Toyota Financial Services and Stellantis Financial Services were among the firms limiting electric-vehicle allocation in those pools. (autofinancenews.net) Residual swings in electric vehicles have been a finance issue for years, but the pressure has increased as model lineups expand and pricing changes hit the used market. Auto Finance News reported in December 2025 that Moody’s Ratings expected the end of federal tax credits to contribute to more price volatility and higher losses in auto asset-backed securities. (autofinancenews.net, autofinancenews.net) The result is a tighter financing chain on both sides of the showroom. Buyers are stretching terms to afford monthly payments, while lenders and bond investors are getting more selective about how much electric-vehicle value risk they are willing to carry. (autofinancenews.net, autofinancenews.net)
