Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
FTA: In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever
Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months
Based on recent economic history, I am just really opposed to this trend. These people getting loans on an asset that will be worth less than 25% of the original price when the loan is paid off.
I looked at the rates being offered at my credit union. They offer 4.49% for up to 96 months. That's a little high for my taste but not horrible. Given the rate table below, 72 months [on a new car] seems to be the best option. It'll be tough to do worse than that in the market.
Still having a car payment by the time you start needing tires, brakes, repairs, etc. is a recipe for financial disaster. The first thing the person will do is skip the car payment and justify it by saying they need the repairs to get to work.
Still having a car payment by the time you start needing tires, brakes, repairs, etc. is a recipe for financial disaster. The first thing the person will do is skip the car payment and justify it by saying they need the repairs to get to work.
Only a financially irresponsible person would do that.
FTA: In the final quarter of 2012, the average term of a new car note stretched out to 65 months, the longest ever
Experian said that 17% of all new car loans in the past quarter were between 73 and 84 months
Based on recent economic history, I am just really opposed to this trend. These people getting loans on an asset that will be worth less than 25% of the original price when the loan is paid off.
By the way -- it's NOT seven years. It's EIGHT. and EIGHT MONTHS.
Just insane... but people will do it. I know plenty of people that have decided they will always have a car payment.
Still having a car payment by the time you start needing tires, brakes, repairs, etc. is a recipe for financial disaster. The first thing the person will do is skip the car payment and justify it by saying they need the repairs to get to work.
I needed tires when my car was less than two years old... some how I survived. I also did a two-year note which drastically exasperated the disaster quotient since my payments were 3x or more what these longer notes woud have been. On the flipside, I've been payment free for over two years now, which is quite nice. That was intentional. I bought the car knowing I intended on going back to graduate school in two years and wanted something that would be reliable and paid off. That didn't end up occurring, but I spend 15 months in abroad and nine months retraining and getting licensed when I came back to the States.
Partly, the longer loan terms are just a reflection of the fact that cars last longer and hold their value better. In the '50s when the average car just wasn't 11+ years old as it is today. Average new cars are likewise held longer, nearly six years now.
longnecker,
You're assuming 0 down and no trade-in. That's not the case for most people. On my first new vehicle purchase, I put $8,000 down, nearly 50%. On my next one, I'll probably get at least $6,000 as a trade-in (not planning on it for a year or two, could be longer) and then down payment would depend on interest. At 2-3%, I wouldn't bother putting anymore than that necessary down. At 5% I'd just pay cash.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.