New data from Experian’s State of the Automotive Finance Market Report – Q1 2026 shows a continued shift toward loan terms longer than six years for both new and used vehicles, while refinancing activity is lowering interest rates and monthly payments. The trends have direct implications for lenders, credit unions, and financial executives managing automotive portfolios.
Experian Report Highlights Extended Loan Terms
The report finds that 35.55% of new‑vehicle loans in Q1 2026 had terms longer than six years, up from 30.83% a year earlier. Loans extending beyond 85 months rose from 2.95% to 3.33% over the same period. In the used‑vehicle market, loans over six years accounted for 31.54% of financing, up from 28.60% in Q1 2025, with 85‑month terms increasing to 1.40% from 1.32%.
Average new‑vehicle loan amounts grew $2,150 year‑over‑year to $43,925, and average monthly payments rose from $748 to $770. For used vehicles, the average loan amount increased $785 to $27,070, and monthly payments climbed from $523 to $531. Despite the rise, nearly 20% of new‑vehicle loans still had monthly payments under $500.
Refinancing Activity Shifts to Credit Unions
Refinancing helped consumers trim 2.2% off their interest rates in Q1 2026, with the average refinanced rate falling to 8.05% from 10.29% a year earlier. This translated into an average monthly payment reduction of $81. Credit unions captured the largest share of refinancing activity at 63.43%, up from 62.31% in Q1 2025, while banks’ share slipped to 22.59% from 23.51%. Refinancing through credit unions saved borrowers $101 on average, compared with $60 for bank‑refinanced loans.
Subprime Segment Expands Amid Broader Credit Access
Subprime borrowers represented 15.75% of total vehicle financing in Q1 2026, up from 14.40% a year earlier. New‑vehicle subprime financing grew to 6.88% from 5.61%, and used‑vehicle subprime financing rose to 20.60% from 19.36%. Experian’s head of automotive financial insights, Melinda Zabritski, noted that “there continues to be increased momentum within the subprime segment as financing options expand across the automotive finance market.”
Key Takeaways
- 35.55% of new‑vehicle loans and 31.54% of used‑vehicle loans had terms longer than six years in Q1 2026, up from 30.83% and 28.60% respectively a year earlier.
- Refinancing reduced average interest rates by 2.2% to 8.05% and lowered monthly payments by $81, with credit unions handling 63.43% of refinanced loans.
- Subprime borrowers accounted for 15.75% of total vehicle financing in Q1 2026, marking an increase from 14.40% in Q1 2025.
FinanceInsyte's Take
The move toward longer loan terms and higher subprime participation signals a broader appetite for extended credit in an environment of declining rates. Lenders should monitor credit‑union‑driven refinancing dynamics and the modest rise in delinquency rates (30‑day delinquencies at 2.00%) as they assess risk appetite and pricing strategies for future auto‑loan portfolios.
Source: Businesswire
