Hand it to great Yankee ingenuity to find a way around the affordability issue facing homebuyers, and many other segments of the economy, to give consumers a break. An example is the newfound way automobile manufacturers are addressing the new car affordability challenge, a trend that could soon spill over into the home mortgage market.
The vast majority of new cars are sold with some sort of financing. Yes, there may be a trade-in that reduces the price the dealer and the buyer have agreed to for the new vehicle, and almost always, the dealer’s finance department steps in to provide the difference. Still, the cost of new cars has risen so much in recent years that the typical three-year and even five-year loans result in monthly payments that have become unaffordable for many consumers. Increasingly, monthly payments on the average new car purchase exceed $1,000 per month, as the amount of financing on new car purchases has risen to a record high of $43,899 in the first quarter of this year. Enter the workaround – the seven-year loan.
First, it is important to note the evolution of automobile reliability as a key factor in making longer loan terms possible. When I was growing up, most U.S. factory warranties were quite short, typically around 90 days to one year with limited coverage. Lincoln’s 1961 Continental is often cited as a turning point because it offered a then-generous 12-month/12,000-mile bumper-to-bumper warranty. Ford doubled that coverage on the Continental to two years/24,000 miles for 1962, and extended similar terms to some Ford and Mercury models soon after. However, Chrysler’s move to a five-year/50,000-mile powertrain warranty in 1962 went well beyond 12 months/12,000 miles and surprised the rest of the industry, offering that warranty on principal engine and powertrain components. General Motors and Ford initially scoffed at the move but eventually had to respond with more competitive warranties of their own. Three-year/36,000-mile bumper-to-bumper coverage became the de facto U.S. industry standard in the early 1990s, with trade sources pegging 1992 as the point where it was broadly treated as standard.
The build reliability, coupled with longer and longer warranties, has pushed ownership terms up; today, recent analyses of registration data show that people keep new cars for about 8.4 years on average before letting them go. Sedans are often kept six to eight years, while expensive SUVs are closer to eight to 10 years, and light trucks are 10 to 12 years. Roughly two-thirds of Americans have owned their current car for five to six years or less, which fits with that eight-year average once you include people who keep vehicles well past a decade.
So higher new-car prices and better durability have pushed the average age of vehicles on the road to about 12.5 years, so even though ownership of a given car averages around eight years, many second owners run them much longer. Enthusiasts and lessees may swap cars in three to five years, while cost-focused owners commonly keep them a decade or more.
Reliability is a major factor in driving up ownership periods, because car buyers are facing an uphill battle as it relates to affordability and are changing their approach when it comes to financing their vehicles. Eighty-four-month or longer loans made up 22.9% of financed new-car purchases in the first quarter of 2026, an all-time high, compared to 20.8% in the fourth quarter of 2025 and 21.2% in the prior year. Extended financing data shows that car buyers are getting creative just to keep their purchases within reach. As loan amounts and monthly payments continue to climb to record levels, consumers are having to work harder to make the numbers fit, a clear sign of how strained affordability has become.
Is this the answer to home affordability challenges? Is the 40-year mortgage a way to solve the monthly payment affordability crisis? The home mortgage market needs to take a page from the auto industry’s playbook.
Pierre G. Villere serves as president and senior managing partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry that specializes in mergers & acquisitions. He has a career spanning almost five decades, and volunteers his time to educating the industry as a regular columnist in publications and through presentations at numerous industry events. Contact Pierre via email at pvillere@allenvillere.com. Follow him on X – @allenvillere.
