Prior to the implementation of the National Credit Act in 2007, the average time taken to settle a new vehicle finance contract was 25 months; it is now 43 months.
However, TransUnion Auto Information Solutions CEO Mike von Höne said there were indications that this trend was starting to improve as consumers begin to regain better control of their financial situation and strive to pay down their debts in the current low interest rate environment.
"Nevertheless, consumers continue to enter into longer period contracts, presumably in an attempt to make monthly repayments more affordable from a cash flow perspective," Von Höne added.
At present, TransUnion's data reveals that the average contract term for new vehicles is 64 months and 62 months for used cars.
TransUnion's data also reveals a slightly decreasing trend over the past year in the number of contracts that go beyond the 72-month mark.
"Contract periods that go beyond 72 months may be due to accounts that go into debt review which then allows for credit agreements to be extended. In addition, most banks may prefer agreeing to extended payment arrangements than having to repossess vehicles," Von Höne said.
The greatest portion of new vehicle contracts (51%) now fall into the 60- to 72-month bracket.
In the used car sector, approximately 36% of contracts written are for periods of between 60 and 72 months, followed by 32% for 48 - 60 months.
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