The average car loan in 2006 was 44 months. It is now 66 months and there are even longer loan terms.
Cars have become more expensive because of entertainment systems and other integrated technology. All these must haves are driving average car cost up.
As you drain every last mile from your old car you start to look for a new car. But most people don’t have the income they had pre-recession. So, this trend drives people to stretch loans over longer periods. These longer loans result in less car sales in the future. If you’d like to turn in your vehicle in 5 years but are still in the loan it’ll take longer to be able to flip your vehicles value because you still owe so much on it.
Longer loans usually mean larger principle. The increase in loan life shows that people are buying more expensive cars, probably ones they can’t afford.
The average new car costs $30,000, but the average family can only afford between $20,000 and $25,000.
The longer loans takes away from your savings. When you are out of money each month because of your unaffordable car payment you are losing money that could be put to other uses.Honda Motor Company says it offers the fewest number of long car loans in the industry – primarily because it wants its customers to still have equity in their vehicles after they finish paying off the loan. Most car companies make the longer loans widely available.
A handful of companies get as many as 49dZFkcrKdk7XegyMd3kp4MGQoLFeMWM6Lion2T3q3h6DScBViFrXXuZoxkHq1TB1mGufMoGzfXd7jJ7ocgpJGxdEiGirjGor resale value is greatly diminished.
So, if you are offered an extended loan life to get approved make sure its right for you. The longer life may put you to far in debt. Consider how much car you need and how long you can pay on it while still saving.