Kelley Blue Book reports the average new vehicle transaction price reached $50,562 in September. Edmunds says the average amount financed set a record of $44,664 in the third quarter — with an average monthly payment of $787 — and 25.5% of financed new vehicle purchases now carry terms of 84 months or longer, up from 21.8% a year earlier.

Against that backdrop, 96-, 100- and even 120-month loans are entering the conversation. When a customer arrives with a payment ceiling, stretching the term is the fastest way to say yes. But dealer agents know the fastest “Yes” is not always the most profitable one.

Consider the average amount financed, $44,664, at an illustrative 8% APR. At 72 months, the payment is about $783 and total interest is about $11,720. At 84 months, the payment falls to about $696 and interest rises to about $13,812. At 100 months, the payment drops to about $613, but interest climbs to about $16,673.

That is $170 less per month than the 72-month loan, in exchange for roughly $4,950 more in interest and a far longer stretch of owing more than the vehicle is worth. The dealership feels the cost later, in four places:

• Finance source exposure: Many banks and finance companies set limits on term and loan-to-value, so a stretched deal can mean a lower advance, a higher rate or a decline.
• Chargebacks: When a customer defaults or pays off early, reserve and F&I product revenue can be charged back.
• GAP: The longer negative equity lingers, the more important GAP becomes, and the more valuable the conversation about it is.
• The next sale: A customer who is upside down cannot easily return, and one who rolls that balance into a new loan starts the next deal with a higher loan to value and a harder approval.

The strongest position an agent can take is that of a profit partner who attacks the problem with data-backed solutions. Here are four steps you can take today:

1. Tie Long Terms to Long-Term Performance.

Start by asking the dealer principal and F&I director a handful of questions. What share of deals are 84 months or longer? What is the average loan to value at delivery? How often is negative equity rolled into the next loan? What is the chargeback rate on products? How many customers come back for their next vehicle, and when?

Few dealers have put those answers side-by-side. When an agent does, a vague worry about long loans becomes a number tied to gross profit and retention.

From there, you can help build a simple affordability menu for the desk. Before the term becomes the answer, show the customer a used or certified vehicle, a larger down payment, a shorter term with a structured payment plan, or a longer term paired with the right protection.

2. Use Structured Payments as a Profit Tool.

For customers who do take a longer loan, structured payment programs offer a practical option. Payments can be aligned to pay cycles, weekly or biweekly, and extra payments can be made toward the loan. A biweekly plan effectively adds one extra monthly payment each year. For a customer with an $800 payment, that is about $4,000 over five years, which, if applied to principal, can improve their equity position and shorten the payoff.

These programs are not a guarantee against negative equity. The results depend on the rate, the loan agreement and how payments are applied, and customers should understand any fees before they enroll. But a structured payment option gives the F&I office one more product to offer, supports the affordability conversation, and may reduce the risk of early default or payoff.

These programs remain underused, and agents who explain them well can help dealers evaluate reputable providers and the right customers.

3. Equip the F&I Office.

Strategy only pays off if it reaches the desk. Agents can give F&I managers a simple talk track, such as: “Let’s look at a payment that works today and keeps you in a strong position when you are ready for your next vehicle.” Then they can train the team to present the term comparison, GAP and a structured payment option as one conversation instead of three separate pitches.

Presentations should always be based on the customer’s actual needs and include every required disclosure, because compliance is part of protecting profit.

4. Protect the Next Sale.

The 100-month loan is not the enemy, and for some customers it may be the right answer. The risk lies in using it by default.

Dealer agents who bring data, alternatives and structured payment options help their dealerships keep more of the gross they earn today and keep customers coming back for the next sale.

Damon Walker is senior director of national sales for AutoPayPlus.