Longer auto loans becoming more common
Many things can vary when it comes to the terms of an auto loan. One is the length of the loan. Some auto loans are relatively short, while others stretch on for longer.
Lately, longer auto loans have been becoming more common. It is estimated that, currently, almost a third of all new auto loans are between 73 and 84 months in length. Four years ago, auto loans of this length made up less than 10 percent of auto loans.
One thing that may be drawing auto buyers to these longer loans is that stretching a loan’s length out longer can result in lower monthly car payments.
Of course, longer auto loans are not without their downsides. Some of the downsides longer auto loans can have include:
- Higher total interest payments.
- The lower monthly payments perhaps enticing a buyer to buy a more expensive car than their overall budget can reasonably support.
- A person facing a poor car value to loan amount owed ratio.
Thus, in some instances, a longer auto loan could lead to a person being in a more vulnerable position if financial trouble were to strike.
Why do you think longer auto loans are becoming more common these days? What impacts do you think this trend will have? Do you think this trend could lead to more people being vulnerable to suffering auto loan troubles down the line?
When a person experiences problems with keeping up with an auto loan, whether it be a shorter loan or a longer loan, there are some very serious things they could end up facing. For example, they could end up facing having their car repossessed. An auto repossession can be a terrifying prospect for a person who is struggling with auto loan debt, as loss of one’s primary mode of transportation can have some very serious negative effects on a person, perhaps even negative employment effects.
Bankruptcy and other options for debt relief can sometimes be used to help address auto loan problems and avoid auto repossession. Thus, individuals who are at risk of losing their car due to auto loan troubles may want to consider having a discussion about their options with a skilled bankruptcy lawyer.
Source: KSL, “Beware downside to longer car loans, experts warn,” Bill Gephardt, April 15, 2015