Both Mazda and GM are advertising 0% for 84 up here.
yikes... 60 months my limit (if 0%) but generally pay them off in half the time.
-> http://www.cnbc.com/id/47540732As 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%
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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.
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)
Last edited by Grey Mouser; 05-23-2012 at 08:10 PM.
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.
Other things?+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.
I'd likely feel more free to go out to lunch or waste it on booze and MDMA.
I though it was kind of crazy that the average price paid for a new car is almost $31k:
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.
Improving the signal-to-noise ratio
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.
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.
I don't care how you spin it, a $0 monthly car payment is ALWAYS better than 84 months of 0% financing.
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.
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...
98 wrangler build
the position being taken is not to be mistaken for attempted education or righteous accusation only a description just an observation of the pitiful condition of our degeneration