From captive finance companies to one-lot buy-here, pay-here dealers, the entire industry is seeing a shift to a ‘new normal,’ which includes smaller down payments, longer terms and negative equity being rolled into a larger financed amount.

While metal is being moved now, trends and buying patterns that might appear three years or more down the road are what industry observers are currently pondering.

“As we shift over to the ‘new normal,’ which is a little bit concerning, right now the belief is the typical consumer goes $400 to $500 on a new car and $300 to $400 on a used car as the monthly payment,” Experian Automotive president John Gray said.

“So how do you get them the most car in that payment structure? As the interest rates have come down, the prices have gone up so you move out the financing,” Gray continued. “The question is still going to come in as interest rates go up in the future, can you put still put a rate out there that puts them in that payment structure? Also, you’re in the car longer so how can you get equity in the car? Is this going to cause the auto industry to think about when people are going to come back into the market?”

Gray’s Experian colleague is considering the same kinds of questions.

Senior director of automotive credit Melinda Zabritski said, “You’ve got extended (loan to value) and loans. Will consumers change their owning patterns?

“For years, consumers would take their car and trade it back in every 36 to 38 months,” Zabritski continued. “It cut back during the recession. But if the consumer still expects to return to market in 3½ years and they’re on a 72- or 84-month loan with a high origination LTV, are they in a position to come back into the market unless LTVs also continue to expand out?”

The latest data from Experian as well as J.D. Power showed these questions aren’t going away any time soon.

According to its latest State of the Automotive Finance Market report, Experian indicated the average amount financed for a new vehicle was $27,430 in Q4 2013, up from $26,691 in Q4 2012. This marked the highest average loan amount for a new vehicle since 2008 and the first time the amount has exceeded $27,000.

Additionally, the average loan amount for a used vehicle during the quarter was $17,974, up $345 from the previous year, which was also a record-high since 2008.

Furthermore, Experian determined new-vehicle interest rates were up to 4.37 percent in Q4 2013 from 4.36 percent in Q4 2012, while used-vehicle interest rates were up to 8.71 percent in Q4 2013 from 8.48 percent in Q4 2012

And the latest analysis from J.D. Power showed long-term loans — classified as loans that are 72 months and longer — accounted for 33.1 percent of new-vehicle retail sales in February, according to data gathered by the Power Information Network (PIN) from J.D. Power.

That pace surpassed the previous record set in September 2012, when 30.6 percent of new-vehicle sales were loans of 72 months or longer.

“Longer loan terms, coupled with the current low interest rate environment, increases the affordability of new vehicles for consumers,” said Thomas King, senior director of PIN at J.D. Power. “This is resulting in strong demand for new vehicles and also record transaction prices.”

King noted that while the increased use of long-term loans has caused concern in the automotive industry about the risks associated with extended purchase cycles, those risks are mitigated by a couple of factors.

First, while 72-month loans are becoming increasingly popular, loans for 24 to 60 months are keeping the average term for new-vehicle loans at 66 months, an increase of only three months since 2009. Second, increased leasing, with typical contract lengths of just 36 months, ensures a healthy supply of future vehicle buyers with shorter purchase cycles.

“Unlike buyers who finance their vehicle and have considerable discretion regarding when to return to market, consumers who lease their vehicle must come back into the market when their lease terminates,” said King. “The current level of leasing means there will be a steady and significant stream of lessees returning to market three years from now.”

J.D. Power also pointed out that while loans of 84 and 96 months are available to consumers, analysts contend such loans have yet to compose any meaningful portion of the auto financing market, with 84-month and longer loans comprising only 3 percent of all sales in February.