Average auto loan term rose to 64 months (15.4% surge running 73-84 months)

[rich!]

yikes... 60 months my limit (if 0%) but generally pay them off in half the time.

As auto sales grow so is the length of time consumers are taking to pay for their new car or truck.

Experian Automotive analyzed the nearly five million auto loans written in the first quarter of this year and found the average length for a new vehicle loan has grown to 64 months, up 1 month compared to the first quarter of 2011.

“It’s all about managing the monthly payment,” says Melinda Zabritski, Director of Automotive Credit. “People are taking out longer loans so the payment is right.”

Right now, the average monthly auto loan payment is $461, a dollar higher than it was last year. The average amount financed is $25,995 (up $589 compared to last year). As consumers try to keep their car payment in check, they are increasingly signing up for loans that stretch out over 6 and 7 years. In the first quarter there was a 15.4% surge in auto loans running 73-84 months.

The first quarter also saw an increase in the percentage of loans written for those buyers with non-prime credit scores. More than 23% of the loans in Q1 were for buyers with non-prime, subprime, and deep subprime credit scores. All three of those groups saw at least a 10% surge in new loans.

Should that growth in subprime auto loans be a concern? Not necessarily.

“As the economy improves and more credit becomes available, this is the natural development of the market,” says Zabritski. “If lenders are managing those loans properly, it is not an issue.”

Experian says 30 and 60 day delinquencies both fell in the first quarter, while repossessions fell by 37%

-> http://www.cnbc.com/id/47540732

[ThreadBomber]

Both Mazda and GM are advertising 0% for 84 up here.

[2.0T_Convert]

It is a rare day I come across an auto policy with a new truck that has less than 72 months of financing. 84 months is fairly common.

[lojasmo]

Meh. 0% no care.

[jepva]

The rise in resale values and low low rates allow for this. It was a different story when they were 60 month loans at 15% interest.

[Dave Zero]

These new cars don't rust and are built better than ever.

6 years 100,000 miles is the minimum before major maintenance even starts.

Our 2007 Yaris made it through the payments and is still running without any problems. If I was going to replace the car just based on wear and tear, I will be looking about ten years out from now, making a new car a luxury more than anything.

As the new car prices and inflation creep up but wages do not match, people need longer to pay off a new car.

[Slipstream]

Meh. 0% no care.

You still have to make payments SEVEN YEARS later. I realize there is some financial benefit to 0% for that long, but **** that.

[ThreadBomber]

You still have to make payments SEVEN YEARS later. I realize there is some financial benefit to 0% for that long, but **** that.

I'd take that all day long because you can just pay it off early if you want, but even that is kinda dumb since you can make more than 0% elsewhere.

[2.0T_Convert]

You still have to make payments SEVEN YEARS later. I realize there is some financial benefit to 0% for that long, but **** that.

Since low interest or zero % terms can last 60 months or more there is really no negatives. Lower monthly payments with the option of paying more to finish the term quicker if you desire.

[MatchStick]

I find it humorous when people struggle to see the value in taking advantage of low interest rates offered over a longer term.

[Grey Mouser]

I find it humorous when people struggle to see the value in taking advantage of low interest rates offered over a longer term.

There's advantages and disadvantages.

Advantages: lower payment per month, 0% interest especially.

Disadvantages: If you only pay the minimum you may still be upside down on the car for some time if you opt to try and sell/trade it in at the 3/4/5 year mark not to mention the possibility of being out of warranty _AND_ possible repair bills coupled with your normal payments (which drives me up a wall). Oh, and the mere fact you'll be paying on a car for 6 or 7 years rather than 5 or shorter. (again assuming you are only paying the minumum.. which is part of your argument about longer loans)

[Grey Mouser]

Since low interest or zero % terms can last 60 months or more there is really no negatives. Lower monthly payments with the option of paying more to finish the term quicker if you desire.

There most certainly are negatives. Owing more at the typical age people trade off cars (4/5 year mark), possibly being upside down for that long.. and having to worry about perceived insurance value vs owed value (carrying GAP for years and years)

[Slipstream]

Disadvantages: If you only pay the minimum you may still be upside down on the car for some time if you opt to try and sell/trade it in at the 3/4/5 year mark not to mention the possibility of being out of warranty _AND_ possible repair bills coupled with your normal payments (which drives me up a wall). Oh, and the mere fact you'll be paying on a car for 6 or 7 years rather than 5 or shorter. (again assuming you are only paying the minumum.. which is part of your argument about longer loans)

At some point, I'd rather pour that money into a vacation, or upgrades on the house, or whatever. Debt is debt, even if it's attached to a 0% loan. I'm not saying a 0% loan for 4-5 years is a bad idea, but 7+ is a bit excessive.

[romanl]

at 0% who cares , as long as you plan on keeping the car longer the loan term
at 0% if you have whole amount in cash, you can always put it into online bank account and collect few % while paying off the car.

[jepva]

At some point, I'd rather pour that money into a vacation, or upgrades on the house, or whatever. Debt is debt, even if it's attached to a 0% loan. I'm not saying a 0% loan for 4-5 years is a bad idea, but 7+ is a bit excessive.

+1. This is what a lot of people fail to understand I think. By financing at lower terms and higher payments, that's more money tied up in a car payment every month that could have been used for other things. I am a fan of smaller payments = more money left in your bank account for savings or other things.

Also, I'm not of a fan of people who come into a large chunk of cash and want to waste it away on a car (a depreciating asset). As far as cash flows and time value of money is concerned, it makes much more sense to make payments or lease a depreciating asset (when it's low interest) than to pay in all cash. Just think, if there's an accident or some other circumstance that's a large amount of "cash" down the drain you'll never get back. At least if you were making payments, the loss would have been more mitigated. I've had friends who saved "years" so they could pay for a car with cash, instead of a down payment on a house.

[2.0T_Convert]

There most certainly are negatives. Owing more at the typical age people trade off cars (4/5 year mark), possibly being upside down for that long.. and having to worry about perceived insurance value vs owed value (carrying GAP for years and years)

Sucks for those people. Stop calling us all fools for chooseing 60 months of more.

+1. This is what a lot of people fail to understand I think. By financing at lower terms and higher payments, that's more money tied up in a car payment every month that could have been used for other things. I am a fan of smaller payments = more money left in your bank account for savings or other things.

Other things?

I'd likely feel more free to go out to lunch or waste it on booze and MDMA.

[Grey Mouser]

Sucks for those people. Stop calling us all fools for chooseing 60 months of more.



Other things?

I'd likely feel more free to go out to lunch or waste it on booze and MDMA.

Choosing doesn't have an E in it, you fool. Furthermore I didn't call anyone a fool, I'm just pointing out there ARE negatives to taking out longer loans even at 0%. If you plan to keep the car until it rusts out on you, sure why not?

[adrew]

I though it was kind of crazy that the average price paid for a new car is almost $31k:
http://www.autoblog.com/2012/04/11/a...l-time-record/

I am a fan of financing with good terms. Buy a decent car with good resale and a lot of incentives, then be annoying and get the car for close to invoice and you will almost never be upside down on it, even putting zero down.

I have two ~$14k car notes @ ~3% for 5 years. The payment for both put together is $567 (a little high for me) but my mortgage is only $610 (with homeowner's and property taxes included) so it isn't that bad compared to what most people have going on. I always send in extra but it is nice to have the low payment there in case I need the $$$ for something else.

[vasillalov]

To all the people who say: "0% who cares if its 7 years"... You are all making one very big assumption: that you will have a job in those 7 years to make payments and that your life situation won't change drastically in 7 years. Now THAT is a big assumption if you ask me...

The best thing you can do for yourself is to be completely debt free! Plain and simple! You just can't predict the future with 100% certainty.

[hardcore4life]

Took 60 months loan but I am going to pay off my ST in around 3 years or less

[elementpb]

I took a 72 month loan because the number came out round and the rate was low. mostly because the number was round. I think I need help.

[dmorrow]

The whole "0% so I might as well take out he longest loan possible" is fine if you take the money you would have spent on the shorter term and invest it. Problem is most end up just spending the extra money and it doesn't really help anything.

For me, even with 0% I wouldn't take out a 72 month loan. I don't want the hassle of making payments this long.

Right now really enjoying not having any car payments, makes far easier to save for the next one.

[seadoo2006]

yikes... 60 months my limit (if 0%) but generally pay them off in half the time.



-> http://www.cnbc.com/id/47540732

Can I please ask WHY in god's name you'd pay off a 0% note early? You seriously are flushing money down the sh*tter ...

[Slipstream]

The whole "0% so I might as well take out he longest loan possible" is fine if you take the money you would have spent on the shorter term and invest it. Problem is most end up just spending the extra money and it doesn't really help anything.

BINGO. Talking about how much money you could make is great if you actually invest the $20,000 you aren't spending on the car in a pretty decent investment account (and that assumes you have that kind of cash on hand). In reality, most people will just turn right around and pour it into some other debt that ISN'T 0%... And now you're even deeper in the hole. Putting it in a general savings account won't even keep up with inflation so you are actually losing money.

I don't care how you spin it, a $0 monthly car payment is ALWAYS better than 84 months of 0% financing.

[ThreadBomber]

I don't care how you spin it, a $0 monthly car payment is ALWAYS better than 84 months of 0% financing.

Of course, but that's not the comparison.

The comparison is more like 48 months at $400 + 36 months at $0, versus 84 months at $228.57.

[tjl]

I don't care how you spin it, a $0 monthly car payment is ALWAYS better than 84 months of 0% financing.

Well, the choice is more like, 1 payment of $25,200 or 84 payments of $300, if you actually get 0% interest.

[MatchStick]

Problem is most end up just spending the extra money and it doesn't really help anything.

problem is, in threads like this people post stuff like this...

[curvedinfinity]

Well, the choice is more like, 1 payment of $25,200 or 84 payments of $300, if you actually get 0% interest.

Interest and TVM are the only real costs affected by loan terms. The rest is mind magic.

Do whatever works for you, but I'm fine with a loan that gives me little equity in the car when I sell it. I'd rather have the cash flow going towards an emergency fund or an investment.

[deucestudios]

I really wanted to do 5 years, but we were able to get the same 3.9% for 7 years on a 13,000 mile car, so... why wouldn't we? Gap insurance added $6 to the monthly...

[curvedinfinity]

I really wanted to do 5 years, but we were able to get the same 3.9% for 7 years on a 13,000 mile car, so... why wouldn't we? Gap insurance added $6 to the monthly...

Best part is you can refinance in 2 or 3 years for an even lower APR.

[GruuvenNorth]

The problem with long term 0% payments is that the value of your car in 5 years may not be as much as you owe the loan. Unless you plan on keeping the car for that amount of loan time.

[curvedinfinity]

The problem with long term 0% payments is that the value of your car in 5 years may not be as much as you owe the loan. Unless you plan on keeping the car for that amount of loan time.

If someone took out a 7 year loan and sold in 5 years, they'd have payed down 71% of the loan. If they bought a $25,000 car, that's $7,250 left on the loan after 5 years. Most likely they'd have a couple grand in equity on trade in at that point.

[JettaGT8V80]

jesus we are stupid

60 months is a long term 84 thats nuts yes I'm still paying for my 2005 jetta that i bought new but my payment is only $200 a month

[Double-V]

The problem with long term 0% payments is that the value of your car in 5 years may not be as much as you owe the loan. Unless you plan on keeping the car for that amount of loan time.

At the end of the day, it shouldn't matter IF the borrower has the cash to cover the difference. In other words, if the borrower is using the long-term 0-percent interest loan to free up cash for other purposes like investing, home improvements, etc. or even just to keep the emergency fund stocked up. Sadly, the vast majority of borrowers choose long terms because they can't service the debt with shorter amortization periods. They need to stretch it to 60-72-84 months or do balloon payments so they can get approved for the loan (typically when buying a car they can't really afford).

[curvedinfinity]

At the end of the day, it shouldn't matter IF the borrower has the cash to cover the difference. In other words, if the borrower is using the long-term 0-percent interest loan to free up cash for other purposes like investing, home improvements, etc. or even just to keep the emergency fund stocked up. Sadly, the vast majority of borrowers choose long terms because they can't service the debt with shorter amortization periods. They need to stretch it to 60-72-84 months or do balloon payments so they can get approved for the loan (typically when buying a car they can't really afford).

Word to people buying cars they can't really afford. That's the real problem, not the loan terms.