In recent years car buyers have sought longer term loans than in previous decades. The original 36-month auto loan concept is fading. About 40 percent of the credit market consists of 72-month loans for new or used vehicles, but a growing number of people are choosing eight-year loans.
Pros for Extended Loans
- Helps keep monthly payments low, providing monthly savings
- People are keeping cars longer due to durable technology
- Average length of car ownership is now 6-8 years
- Enables consumers to buy higher priced vehicles
Cons for Extended Loans
- Borrowers pay higher interest
- Trading in a car after three years can lead to owing much more than the value of the vehicle
- You cannot pay off long term loans before buying a new car
- Interest rates tend to increase over long term loans
Terms for car loans in 2015 are reaching record levels. With the average monthly payment for a new vehicle near $500 per month at a low interest rate of 4.6%, some people are turning to payday advances online to help make monthly car payments on time.
Another option is leasing, as it can lower the costs of monthly payments. Offers from automakers for zero percent financing are on the rise, which lure consumers into seeking more expensive cars, although it leads to taking on more debt.
As income levels remain flat while inflation drives prices higher, many car buyers are shifting their focus to entry-level crossover utility vehicles, following a period in which small economy cars gained sales momentum. At the same time, the economy has rebounded since the crash of 2008. As gas prices have fallen, Americans have begun to feel comfortable about bigger vehicles again.
Factors to Consider
The average transaction price for a new vehicle in May 2015, according to Kelley Blue Book, was $33,363. This marked a 4.3 percent increase from the previous year. In order to make the down payment, many consumers are turning to payday advances online.
Keeping a car for at least eight years lowers the risk of over-paying as the vehicle depreciates in value.