Throughout the period from the start of the pandemic to this year, which has been marked by an economic slowdown, the average term of car loans taken out by Russians has steadily lengthened. In spring 2020, car buyers borrowed money for an average of three and a half years. Today, the average term is six years. This helps keep debt burdens under control by reducing the monthly payment, which is becoming increasingly unaffordable. The measure is a forced one and not without risks. Experts have warned of an ‘overpayment trap’ and noted that after repaying such a loan, car owners may have little time to enjoy freedom from the financial burden: after six or more years of use, they will either have to replace the car again or spend substantial sums on repairs
In August, the average car-loan term in Russia reached 72 months, or about six years. Since the start of the pandemic, the average term has increased by roughly 1.6–1.7 times
In spring 2020, Russians took out loans to buy cars for an average of just over three and a half years, or 44 months, according to an analysis by Nezavisimaya Gazeta of data from the United Credit Bureau.
The current six-year average for car loans is just that, an average. In practice, loan terms vary depending on the conditions offered by individual banks, the borrower’s credit history, the price of the chosen vehicle and other factors
‘Some banks are already offering car loans with terms of up to 10 years,’ Dmitry Molkov, deputy general director for financial services at Avtodom and AvtoSpetsCentre, told Nezavisimaya Gazeta. ‘The reason is an attempt to reduce the monthly payment as car prices rise. The average price of a new passenger car has approached RUB 3.5 mln.’
Regulatory pressure on all areas of lending is also playing a role. Alexei Volkov, marketing director at the National Bureau of Credit Histories, told Nezavisimaya Gazeta that in September this year, the share of approved car-loan applications, for both new and used vehicles combined, was about 31%.
Amid the regulator’s tight monetary policy, banks are seeking to protect themselves against potential future delinquencies and are approving, at best, only one in three car-loan applications
The same considerations explain the extension of loan terms. Experts warned that this is a forced market adaptation measure, but one that carries delayed economic risks
‘On the one hand, this is the only way for banks to maintain approval rates: by spreading RUB 3–4 mln over 72–84 months, borrowers get a manageable monthly payment,’ the press service of automotive marketplace Fresh said. ‘On the other hand, it is a classic overpayment trap. In the sixth year of the loan, borrowers are mainly paying interest, while barely reducing the principal.’ ‘At an annual interest rate of 16–21%, a borrower repays an amount to the bank over six years that substantially exceeds the cost of the car. This creates a psychological “low-payment trap”: borrowers focus on a comfortable monthly payment while ignoring the total overpayment,’ said Maria Yermilova, an associate professor at the Plekhanov Russian University of Economics.
In addition, Fresh representatives noted that ‘after six years of use, an average car, particularly given Russia’s climate and fuel quality, loses up to 50–60% of its value and begins to require substantial repair spending’. As a result, consumers can find themselves in a situation of ‘negative equity’: they still owe the bank more than the market value of their ageing, increasingly unreliable car.
The increase in the average repayment term for car loans therefore points ‘to worsening, rather than improving, car affordability’, concluded Dmitry Baranov, a leading expert at Finam Management. The main response is to forgo borrowing to buy a car until better times and more affordable interest rates return, said Andrei Smirnov, an expert at BCS World of Investments.
There are other strategies. ‘In 2026, some buyers are focusing on domestically produced cars that can be purchased under subsidised programmes. Others are increasing their down payments: more than 40% of new-car buyers pay more than half of the vehicle’s price upfront. A third group is turning to the used-car segment,’ Molkov said.
The subsidised car-loan programme also deserves attention. ‘It covers a broad range of citizens: families with children, public-sector employees, participants in the special military operation, people with disabilities, as well as electric-vehicle buyers. The key terms of subsidised car lending in 2026 are a 20% discount in most regions, 25% in the Far East, and up to 35% for domestically produced electric vehicles, capped at RUB 925,000. The maximum price of a car with an internal combustion engine is RUB 2 mln. The purchase must be financed with a loan, and the vehicle must be new and assembled in Russia,’ Yermilova said, outlining the terms.
However, under the draft new budget for the next three-year period, annual funding for subsidised car-loan programmes in Russia is set to fall substantially, according to Interfax.
Funding for state car-loan programmes, under which discounts on highly localised domestically produced vehicles are subsidised for eligible categories of citizens, will total RUB 14 bln in 2027–2028, or RUB 7 bln a year. Under the current budget, RUB 20 bln had been earmarked for each of those years.
The draft new budget currently allocates RUB 24.7 bln for subsidised car-loan programmes in 2029
‘Access to subsidised loans is limited by quotas. If funding is cut to RUB 7 bln a year, the number of available loans will fall substantially, creating a shortage and increasing competition among potential borrowers,’ Yermilova warned.
Moreover, in 2026 the government support programmes ran out ahead of schedule. The RUB 20 bln allocated for 2026 had already been exhausted by September.
The Ministry of Industry and Trade has now said it is considering options for increasing the limits for subsidised car-loan programmes over the next three-year period. It also said the amounts specified in the draft budget are only an initial version, providing for the minimum funding required.
ORIGINAL: NG/Car Loans Become a Six-Year Burden
