Americans are getting longer auto loans to take advantage of cheaper monthly payments, but as a result, they are paying more to finance their cars and trucks. It’s a phenomenon that the Consumer Financial Protection Bureau (CFPB) says has continued to grow even as auto financing in general has cooled over the past two years.
The CFPB’s tracking of about five million credit records shows that auto lending rapidly increased in the 2010s, as credit in general rebounded from the doldrums of the Great Recession, and continued to rise until 2016, when it began to cool off, which it has continued to do in 2017. But even as auto lending has generally declined, the use of longer-term loans for buying cars and trucks has continued to go up. The CFPB’s report shows that longer-term loans?those with terms of six years or more?increased to 42 percent of auto loans originated in 2017, compared with just 26 percent of those originated in 2009. There has been a corresponding decline in five-year auto loans, which until now had been the most common term for financing a car purchase.

Longer loan terms typically mean lower monthly payments but a higher overall cost to the borrower. For a breakdown of how that math works, the CFPB gives this scenario: If a borrower gets a five-year loan to finance a $20,000 car purchase with a 5.0 percent interest rate, after three years the borrower will have paid $2190.27 in interest and still have a remaining balance of $8602.98. That ...