Soaring Car Prices, Long-Term Loans Gaining Popularity

KatadataOTO – From year to year, car prices continue to increase. This makes buying vehicles in cash increasingly difficult.

Based on a study from Edmunds, more and more people are choosing to buy vehicles on credit with long tenors. Even in the United States, many consumers are utilizing loans of up to seven years.

In the first quarter of 2025, at least 19.8 percent of consumers in the United States chose this package. That number is a significant increase compared to 2019, which was only 13.4 percent.

Meanwhile, consumers with short-term loans, such as tenors under 48 months, also saw growth. From just 7.1 percent in 2019, it has now risen to 10.2 percent.

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This is despite the fact that the interest they have to pay is considered high. In the United States, the average interest rate is currently holding at an all-time high of 7.1 percent—the same as in Q1 2024.

This situation is seen as an indicator of the public's financial difficulties.

“When one in five new car buyers takes out a seven-year loan, it shows that consumers are indeed experiencing financial difficulties,” said Jessica Caldwell, Head of Insights at Edmunds, as reported by Carscoops (08/04).

This situation is expected to become even more challenging due to the import tariffs imposed by the Trump administration on all imported cars and spare parts.

"Even with relatively stable interest rates, the reliance on long tenors shows how difficult car purchasing has become. Now, new tariffs risk putting vehicle ownership even further out of reach,” she added.

Meanwhile in Indonesia, the situation is not much different as most people purchase vehicles on credit. However, the increasingly strict regulations from financing companies have become the challenge.

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“Before Eid, the number of Vehicle Order Letters (SPK) was indeed quite high, but the approval rate by financing companies must be monitored,” said Yusak Billy, Sales & Marketing and After Sales Director of PT Honda Prospect Motor some time ago. 

This is because it's possible that customers will cancel their orders if the financing company rejects their credit application.