Car buyers opt for lease deals, longer-term loans

As car prices go up, vehicle loans are pricier than ever. Still, more and more people buy cars, opting for lease deals and longer-term loans to keep monthly payments low.

In a report by Reuters auto companies are maintaining high transaction prices for new units by stretching out loan payments for customers with unworthy credit scores. Credit monitoring company Experian reported Wednesday that in the third quarter, a record high 27 percent of every new vehicle purchases are lease deals. Meanwhile, car financing for new vehicle purchases also reached a record level of 86.6 percent.

According to Experian, more people are going for car financing with payment periods six years and above. The average credit score for car loans on new units has reached 710, which is the lowest level since the Great Recession. The average amount for new vehicle loans increased 4 percent in one year to $28,936.

Meanwhile, NBC News reported that auto loans on a payment period of 73 to 84 months increased by 17.1 percent in the third quarter, compared to the same period in 2014. However, most buyers still go for the 61 to 72 months term payment.

"As the price for a new or used vehicle continues to rise, leasing has become a more viable financing option for consumers looking to maintain an affordable monthly payment," said Experian automotive finance senior director Melinda Zabritski in a report by The Street.

"(Those) loans are becoming more popular because so many consumers are now looking to keep their monthly payment under $500," she said. Last quarter, the average monthly payment was $482.

She said people may save an average of $84 every month through leasing than buying. However, she warned people to be conscious about leasing provision, like mileage limits, which can increase costs significantly.

In a report last month by the Federal Reserve Bank of New York U.S. auto loan balances after the third quarter hit $1.05 trillion.