As vehicle costs rise and monthly payments remain elevated, longer loan terms are helping consumers manage affordability. But for credit unions, stretching the traditional auto loan may not be the only answer.
For years, the auto finance industry has responded to rising vehicle prices in a familiar way: extend the loan.
That response is becoming increasingly visible in the data.
Experian’s Q2 2026 State of the Automotive Finance Market found that the average amount financed on a new vehicle reached $43,610, up from $41,895 one year earlier. At the same time, the average new-vehicle monthly payment increased from $749 to $765, even as the average interest rate declined from 6.79% to 6.35%. The average new-vehicle loan term also increased to 69.46 months.
That combination tells an important story.
Lower rates alone have not solved vehicle affordability. Consumers are financing more, paying more each month and extending repayment periods to make the transaction work.
For credit unions competing for auto business, that raises a bigger question:
At what point does extending the loan stop being the best answer to the affordability problem?
More Than One-Third of Auto Loans Now Extend Beyond Six Years
The shift toward longer terms isn’t happening at the margins.
Experian reports that more than one-third of all vehicle loans now carry terms longer than six years, with growth occurring specifically among loans of 73 months or longer.
Among new-vehicle loans, the change is particularly notable.
In 2024, 27.11% of new loans fell into the 73-84 month category. By Q2 2026, that share had increased to 31.84%. Another roughly 2.6% extended beyond 84 months, according to the report’s loan-term distribution.
In other words, roughly one out of every three new-vehicle borrowers is financing for more than six years.
Longer terms have an obvious appeal. Spread the principal across more payments and the monthly obligation becomes easier to manage.
But affordability through term extension comes with trade-offs.
Experian’s data shows that loan-to-value ratios rise substantially as terms lengthen. For new vehicles, average LTV was 115.78% for 61-72 month loans, 128.73% for 73-84 month loans and 133.93% for loans exceeding 84 months.
The payment may become more manageable. The underlying obligation does not disappear.
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The Monthly Payment Has Become the Battleground
For lenders, the challenge is increasingly less about whether consumers want a vehicle and more about how they can fit that vehicle into their monthly budget.
The average new-vehicle payment reached $765 in Q2 2026. And the pressure extends well beyond the average: Experian reports that more than 15% of all new-vehicle payments are now $1,000 or more per month.
Credit unions have traditionally competed exceptionally well on rate.
But rate is only one lever.
When the consumer’s primary concern becomes, “What will this vehicle cost me every month?,” lenders that can structure the transaction differently gain another way to compete.
That’s where leasing deserves another look.
Leasing Approaches Affordability Differently
A traditional loan finances the purchase of the vehicle.
A lease primarily finances the portion of the vehicle expected to be used during the lease term.
That distinction can have a meaningful impact on the monthly payment.
Experian’s Q2 data provides several real-world examples among the country’s most commonly leased vehicles.
The average payment on a financed Honda CR-V was $631, compared with $490 on a lease. A financed Toyota Tacoma averaged $780, versus $558 leased. The Ford Explorer averaged $795 financed versus $611 leased.
Across the top leased models measured by Experian, the average difference between a loan and lease payment was $148 per month.
That is a significant difference for a consumer making a vehicle decision based on household cash flow.
And consumers are clearly using leasing for mainstream vehicles — not simply luxury purchases.
The Honda CR-V was the most commonly leased model in Experian’s Q2 data, followed by vehicles including the Toyota Tacoma, Honda Civic, Nissan Rogue, Ram 1500, Ford Explorer, Hyundai Tucson and Chevrolet Equinox.
That list looks remarkably similar to the vehicles sitting in driveways across credit union markets.
This Is Not Just a Consumer Affordability Question
For credit union executives, the implications go beyond payment.
Longer loans also change the nature of the lending relationship.
Experian found that higher credit scores are generally associated with shorter loan terms. Among new vehicles, average borrower scores declined from 797 for terms of 48 months or less to 740 for 61-72 months and 710 for 73-84 months.
Meanwhile, the average new-vehicle loan term has increased across every risk segment.
Credit unions therefore face a strategic choice.
They can continue trying to solve affordability primarily by stretching the conventional loan.
Or they can give members another financing structure.
Credit Unions Don't Have to Choose Between Lending and Leasing
Leasing isn’t a replacement for traditional auto lending.
It is another tool.
There will always be members for whom vehicle ownership and a traditional loan make the most sense. There are also consumers whose priority is obtaining the vehicle they want at a manageable monthly payment, driving a newer vehicle and returning to market every few years.
Credit unions that cannot serve the second group leave someone else to do it.
And today, that “someone else” is frequently a captive finance company.
Experian reports that captives accounted for 52.23% of new-vehicle financing in Q2 2026, compared with 12.39% for credit unions.
That gap represents more than market share.
It represents member relationships and dealer transactions that credit unions have an opportunity to compete for.
A Different Way to Address Affordability
The industry’s movement toward longer loan terms shouldn’t necessarily be viewed as a problem to eliminate. It is a signal.
Consumers are telling the market that monthly affordability matters.
The question for credit unions is whether the only answer they offer should be a longer loan.
Through CU Xpress Lease, Fusion Auto Finance gives credit unions another way to compete for new-vehicle business and provide members with an additional affordability option — without requiring the credit union to build and manage a leasing operation on its own.
As the 84-month auto loan becomes increasingly common, the strategic question may no longer be whether credit unions can stretch the traditional auto loan further.
It may be whether they should also offer another way to finance the vehicle.