When it comes to car payments, consumers are stretched to the limit.

Buyers are paying more, extending loan terms and making smaller down payments, according to a recent study by the Consumer Bankers Association. Many buyers are also wrapping old loans — for vehicles they haven’t yet paid off — into the terms of their new deals.

“They’re stretching in a lot of cases and may be well advised to pick a more affordable model or keep their car a little longer,” says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association.

Sixty percent of buyers are opting for loan terms of more than five years, the study found.

“It’s been steadily stretching for many years,” says Elmendorf. And it’s because buyers want to get a better quality car and still keep their payments low.

“So many have gotten used to lease payments,” he says. “They’re looking for the cheapest payment on the nicest vehicle they can get into.”

The average loan is now about 65 months and gradually getting longer, says Tom Libby, a senior director of industry analysis for J.D. Power and Associates.

Last year, buyers were typically paying 5 percent of the invoice price as a down payment, according to the study. This year, that’s dropped to 1 percent. Manufacturer and dealer incentives could account for part of that, but it’s also clear more buyers owe in excess of what their cars are actually worth — one side effect of making lower down payments.

“They are increasingly upside down in their loans,” says Elmendorf. “And the longer the loan period, the longer you’re upside-down in your loan.

A combination of longer loan terms and less money down is adding another complication for consumers: “More people are going in owing money on a trade-in, as opposed to being able to add value for the trade in,” Elmendorf says.

Jack Nerad, executive editorial director of Kelley Blue Book, agrees.

“We’re seeing a lot of 100 percent loans, or loans with 5 to 10 percent down,” Nerad says. “Twenty percent used to be the standard.”

“People have less equity in their cars,” he says. “But it doesn’t seem to have had a chilling effect on sales.”

So how much are they rolling over into the new loan? On average, about $2,600, says Art Spinella, president of CNW Research, an Oregon-based consumer spending research company.

Consumers are also buying more options and upgrade packages on the models they select, Spinella says. “They’re buying more car,” he says. “They’re not buying base cars anymore.”

Subprime time Lenders are also making more loans to buyers with subprime credit, but the level of repossessions has not increased.

In 2006 about 9 percent of new car buyers had FICO credit scores of 620 or below (usually considered subprime), up 3 percent from the previous year, according to the report.

“They want to move iron,” Nerad says. “They want to sell cars. One of the ways to sell cars is to lessen your lending requirements.”

Elmendorf agrees. “To have growth, you have to stretch your lending requirements,” he says. But “the auto industry has avoided the subprime problems so far,” he says.

Repossession rates “haven’t changed for some time,” says Spinella. Research shows that people will stop making house payments and credit card payments before they’d stop making the car note, he says.

“Car payments were the last to go,” Spinella says.

Prices up or down? The bankers study also found that buyers were spending about $200 less. In 2005 the average purchase price was $23,500. In 2006, (the latest numbers used for this June 2007 study), it was $23,300.

But other industry measures show transaction prices on cars increasing slightly. For 2006 the average buyer paid $26,740 for a vehicle, according to statistics from J.D. Power. In 2007 the price climbs to $27,393.

At the same time, it’s “a favorable environment for consumers because of the intense competition,” says Libby.

Leasing, which is especially popular with consumers who want to drive more car than they might be able to buy, is either stabilizing or dropping, according to recent data.

The actual number of leases is down, according to the bankers study.

“Leasing, in recent years, has been marked by subsidies by the manufacturers,” says Elmendorf. Those subsidies meant that buyers drive more car for the money.

These days, “fewer banks are promoting leasing and the manufacturers are not stressing leasing with their subsidies,” he says. The study shows a 21 percent drop from last year, as reported by lenders. But Elmendorf cautions the sample study on leasing is about half the size of that for the rest of the survey. Another industry measure predicts that leasing is fairly level.

Statistics from J.D. Power show that 20 percent of buyers in 2006 chose to lease. In 2007 that figure was up to almost 21 percent. “We show leasing relatively stable around 20 percent,” says Libby.

When it comes to buying a car, consumers have a lot of power — if they elect to use it. “They need to shop for financing as well as they shop for the vehicle itself,” he says. About 54 percent of buyers finance through the dealer, while 25 percent pay cash or use a loan from a bank, credit union or other source, according to statistics from J.D. Power. The remaining 21 percent lease.

“Overall there’s a lot of debt,” says Elmendorf. “And if you add that to credit card debt, and home equity debt, consumers are pretty tightly leveraged these days.”