Auto ABS issuers add more 72- and 84-month loans in deals

Lenders are increasingly packaging auto loans with terms of 72 months or longer into asset-backed securities deals as more consumers opt to spread out vehicle costs to lower monthly payments. Longer-term loans have appeared for years in ABS deals, but financiers are including a larger portion of 72-month, 84-month and 96-month terms in collateral pools, albeit with safeguards , as more lenders expand their maximum allowed term, analysts told Auto Finance News. Midland, Mich.-based Dow Credit Union started offering 96-month auto loans about 18 months ago, Zach Felty , dealer relations account manager, told AFN. “What we're actually getting from a loan standpoint is more of the 84[-month term],” he said . “Eighty-four is the new 72, [which is] the new 60 from years past.” Other lenders have lengthened loan terms as consumers face pressure from higher vehicle prices and interest rates. In May, Navy Federal Credit Union began offering used car financing for as long as 84 months . It has offered terms as long as 96 months on new cars for several years, Kevin Wince , vice president of consumer lending operations, previously told AFN. Increase of 72-month loans in auto ABS A higher percentage of longer-term loans was reflected in several auto ABS deals that recently closed, including: PenFed Credit Union’s prime deal issued June 8, in which the portion of loans with an original loan term greater than 72 months increased to 35.69% of the pool from 33.24% in the prior prime issuance in 2025, according to a June 8 presale report from S&P Global ; CarMax’s nonprime deal issued June 4, in which the pool included 22.75% of loans with an original loan term length of 73 to 78 months compared with 16.16% in the prior nonprime deal issued in February, a ccording to a June 4 presale report from S&P Global; and Stellantis Financial Services’ prime deal issued May 28, in which the collateral pool included 33.66% of loans with an original loan term length of 76 to 84 months compared with 31.70% in the prior deal issued in February, according to a May 28 presale report from S&P Global. Driven by affordability One of the main story lines in auto ABS is affordability, which is reflected in the shift toward longer-term loan originations, Mike Girard , senior director of asset-backed securities North America at Fitch Ratings , told AFN . Lenders are starting to fold longer loans into deals, though with caveats, Girard said, noting that the loans included in prime auto ABS deals that Fitch rates are usually capped at 72 months or 76 months. “What we've seen is that [lenders are] more restrictive on their underwriting for those loans, so typically it would have to be a higher FICO, maybe a larger down payment,” Girard said. Longer terms can carry risks for borrowers, too, he said. For example, a buyer who signs for 84-month vehicle financing might end up in a negative equity position because they’ve paid less of their outstanding loan balance over the time the vehicle has depreciated in value, Girard said. Defaults that occur late in longer-term loans also are a risk, Amy Martin , managing director and sector lead for United States ABS at S&P Global , said during a June 3 presentation at the Non-Prime Auto Financing Conference in Irving, Texas. “With the 72-month loans, you're not going to build equity in that vehicle until maybe 48 months [or later],” Martin said. “Those defaults have a high severity of loss at the back end.”

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Auto ABS issuers add more 72- and 84-month loans in deals

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