The surge in auto prices in the second half of 2021 has pushed more consumers to take out auto loans that stretch beyond six years, according to a new report analyzing how millions of consumers finance the vehicles they have purchased.  

Credit monitoring service Experian, which analyzes new- and used-vehicle loans, said more than a third of all new vehicles bought in the fourth quarter were financed with loans that have terms of 6½, seven or even 7½ years.  

Longer loan terms are one way auto buyers are trying to offset a spike in new- and used-vehicle prices sparked by the low inventory of new cars and trucks.  

"The uptick (in loan amounts) is not solely attributed to inventory shortages; it’s partly due to consumers simply buying larger vehicles," said Melinda Zabritski, senior director of automotive financial solutions for Experian.

In the fourth quarter, the average amount financed for a new-vehicle loan jumped $4,300 compared with the same time in 2020, hitting an all-time high of $39,721. While consumers have tried to lower their payments by taking out loans with longer terms, the average monthly payment still increased $65 to a record high of $644.

The numbers are the latest indication that strong demand and low inventories have combined to drive auto prices much higher. "What I think you are seeing is the general lift from the heavy discounting in 2018 and 2019," AutoNation CEO Mike Manley said after the company reported very strong fourth-quarter earnings. 

Higher loan amounts and monthly payments are not just limited to new vehicles. Experian said used-vehicle prices and loans climbed to a record high with the average amount borrowed in the fourth quarter reaching $27,291, an increase of 20%. The average monthly loan payment now is a record high $488, according to Experian.