Long-Term Auto Financing is the New Black Americans are taking on longer-term auto loans these days, with particularly dramatic recent growth in the over-five-years segment. Is this a healthy trend? According to credit bureau Experian Automotive, the average automotive loan term has now reached 66 months. The company said that, in the first three months of this year, average loan terms reached their highest level seen since the company began reporting the data in 2006. Experian said that loans with terms extending out 73–84 months have grown dramatically this year, and now make up more than 24% of all new vehicle loans originations. This means that a significant – and growing – number of Americans are now obligating themselves to seven year payback terms on auto loans. It’s not hard to see why people are doing these super-long-term loans: extending the loan term lowers the monthly payment, allowing people to buy a more expensive vehicle with a monthly payment that would otherwise only allow them to buy a modest vehicle. However, the way these loans are paid back almost always ensures that the vehicle owner will be “underwater” (or owing more than the car is worth) for the life of the loan. The only way to avoid this is to make a large down-payment. Of course, the financially smart thing to do is to buy a cheaper car, on better terms -- since there’s no better feeling than having your car paid off while it’s still new enough to enjoy. But cars have gotten quite expensive – particularly the ones equipped with the sophisticated entertainment, performance and nav systems people crave. Given the expensive tastes of today’s car buyers, it seems almost certain that average loan terms will continue increase. Copyright Today’s Credit Unions Link: experian/automotive. #LongTermAutoLoans #AffordableCarFinancing
Posted on: Wed, 11 Jun 2014 16:58:29 +0000
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