Buckle up and come along on a joyful ride with FRED. Like a three-point turn, this post covers the average maturity of new and used car loans by making three maneuvers.

First, we define the terms. The maturity of a car loan is the target date for full repayment of the borrowed amount. It can be reported in years or months. A value-weighted maturity refers to assigning more importance to loans that are for a larger percentage of the vehicle’s value.

Second, we describe the data. The FRED graph above shows data from the Board of Governors of the Federal Reserve System on the value-weighted average maturity of car loans. Both the blue line tracking new cars and the green line tracking used cars reveal a rising trend since 2009. Also, the value-weighted average maturity of loans for used cars had been consistently lower than that for new cars. But since 2022, both weighted-maturity averages are effectively the same. What gives?

Third, we analyze the data. The rising average value-weighted maturity of loans for used cars can be the result of two different factors:

(a) Used car owners may be taking on loans with longer maturities and repayment schedules.

(b) They may be financing a rising proportion of the vehicle’s value, as high as that financed by new car owners.

Research by Robert Adams, Vitaly Bord, and Haja Sannoh suggests it’s b driving the recent trend in these data.

How this graph was created: Search FRED for and select “Average Maturity of New Car Loans at Finance Companies, Amount of Finance Weighted.” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Average Maturity of Used Car Loans at Finance Companies, Amount of Finance Weighted.”

Suggested by Diego Mendez-Carbajo.