New-car loans keep getting longer-USA Today

[mikeavelli]

http://www.usatoday.com/story/money...0709313&PID=3323800&SID=iafj8lbnj00004ir00dth

Not surprising at all......

New-car sales are running at near-peak levels, partly because many consumers are financing their purchases for longer terms.

The average new car loan has reached a record 67 months, reports Experian, the Ireland-based information-services company. The percentage of loans with terms of 73 to 84 months also reached a new high of 29.5% in the first quarter of 2015, up from 24.9% a year earlier.

Long-term used-vehicle loans also broke records with loan terms of 73 to 84 months reaching 16% in the first quarter 2015, up from 12.94% — also the highest on record.

"While longer-term loans are growing, they do not necessarily represent an ominous sign for the market," said Melinda Zabritski, Experian's senior director of automotive finance. "Most longer-term loans help consumers keep monthly payments manageable while allowing them to purchase the vehicles they need without having to break the bank.


"However, it is critical for consumers to understand that if they take a long-term loan, they need to keep the car longer or could face negative equity should they choose to trade it in after only a few years."

The average amount financed for a new vehicle also hit a record high of $28,711 in the first three months of the year, up from $27,612 a year earlier. The average monthly payment for new vehicles also rose to $485 in the quarter ended March 31 from $474 a year earlier.

But as long as the credit is flowing freely at low interest rates, consumers, lenders and automakers are happy.


The industry reports May U.S. car and truck sales Tuesday, and some forecasters expect the annual rate to exceed 17 million units, a level not seen since the height of the housing bubble a decade ago.

Experian also reported that leasing continues to rise, hitting a record of 31.5% of all new-vehicle transactions in the first quarter of this year, up from 30.2% a year earlier. Leasing enables many consumers to drive away with a more expensive vehicle while keeping their monthly payment within their budgets.

However, the resurgence of leasing will have an effect in the next few years because an increasing number of vehicles coming to auction at the end of leases will drive down used-vehicle prices. That means that the value that people who own vehicles get upon trade-in will drop, requiring them to borrow more, possibly at higher interest rates, or settle for a less expensive car.

 

[mmcartalk]

Not surprising at all......

I agree it is not surprising, not only for reasons in the article, but also for several other reasons the article did not cover. First, unless totaled or abused, vehicles are generally more reliable and lasting longer these days, so they usually won't start falling apart before the payments are done. Second, warranties are generally longer, so buyers have more coverage and fewer worries about major repair expenses. Third, interest rates on car loans have been so low, so long, with no prospect of rising much anytime soon, that many buyers probably aren't concerned about a need to re-finance them in the future....they're consent to pay below rate they have for years. Fourth, our service-economy, nationwide, with lower wages, has created a new class of lower-paid employees that need to have low monthly payments....and, all else equal, the longer the loan is stretched out, the lower the monthly payment will be. Finally, new consumer-protection laws are in effect, now, that restrict the ability of finance companies and repo agents to go take someone's vehicle just because one or two payments were skipped.

 

[CIF]

Agreed 100% with both of you.

 

[nabbun]

I can't stand anything more than a 3 year finance/ 2 year lease. I just can't stand having an auto loan hanging over me any longer than that. If I can't afford it, I'm stepping down to something I can afford.

 

[mmcartalk]

I can't stand anything more than a 3 year finance/ 2 year lease. I just can't stand having an auto loan hanging over me any longer than that. If I can't afford it, I'm stepping down to something I can afford.

A good and sensible attitude.

With leases, BTW, if you prefer (or if you can afford to), you can usually pay off the whole lease-contract in advance, and not have the prospect of the separate payments every month. Techncally, you will be out of debt by doing that (unless you run up additional charges at the end of the contract for excess mileage or wear-and-tear issues)...but it won't lessen the bill any. You still pay it off....just doing it early, so you don't have to write that check or have the automatic withdrawal/debit each month. I have a friend who did that on his 27-month ES350 lease...paid it all off up front, so he didn't have to mess with the billing each month.

 

[nabbun]

A good and sensible attitude.

With leases, BTW, if you prefer (or if you can afford to), you can usually pay off the whole lease-contract in advance, and not have the prospect of the separate payments every month. Techncally, you will be out of debt by doing that (unless you run up additional charges at the end of the contract for excess mileage or wear-and-tear issues)...but it won't lessen the bill any. You still pay it off....just doing it early, so you don't have to write that check or have the automatic withdrawal/debit each month. I have a friend who did that on his 27-month ES350 lease...paid it all off up front, so he didn't have to mess with the billing each month.

Thank you.

And I just learned something new about leasing!

 

[mmcartalk]

Thank you.

And I just learned something new about leasing!

I learned something about leasing, too, I didn't know before. I saw my friend this morning (we're both retired and swim and exercise together) and he told me that AFTER (not before) he had negotiated the lease-payment on his car (ES350), before the final signatures, he also negotiated a slight discount off the total if he were to pay it all up front. That may or may not apply to the dealership you would be dealing with (if they would accept that), but it's worth a try.

 

[DoingDamage]

How can I finance a Ferrari for 30 yrs?

 

[nabbun]

How can I finance a Ferrari for 30 yrs?

Take out a mortgage.

 

[mmcartalk]

How can I finance a Ferrari for 30 yrs?

Forget it. Most of them don't LAST 30 years LOL . They're either wrecked, stolen, end up in museums, or simply fall apart.