Consumers see higher auto payments in exchange for better borrowing rates [Video]

Higher interest rates have dimmed the appeal of longer-term loans even for borrowers with good credit, according to a recent Experian report. 

Instead, they pay more monthly for a shorter term in exchange for a better interest rate, according to Melinda Zabritski, Experian’s head of automotive financial insights. The Federal Reserve has raised interest rates 11 times since 2022 to bring soaring inflation down to a 2% target rate. That has translated into higher borrowing costs for everything from car loans to mortgages. 

Loans of 48 months or less had the lowest new-vehicle financing costs for the fourth quarter of 2023 and these loans correlate with higher credit scores, according to Experian’s report. Conversely, loans that stretch 84 months — or even longer — paid the highest interest rates.

“With interest rates remaining at elevated levels, it’s natural to see consumers continue to opt for shorter-term loans,” Zabritski said in a …