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Longer Car Loans Are Becoming the Norm
By JLP | May 5, 2006
Did you know that the average of the longest car loans is now 77 months? That’s 6.4 years! This article discusses a study released by the Consumers Bankers Association (sorry, I don’t have a link to the actual study). How many cars are still in decent shape after 6.4 years?
The end of the article says that rates as low as 5.5% can be found for loans less than four years and that rates approach 7% for loans five years or longer. Using those numbers along with average new car selling price of $23,534 mentioned in the study, we can do some math:
|
Loan |
Int |
Loan |
Monthly |
Total |
Total |
|
$23,534 |
5.50% |
48 |
$547.32 |
$26,271 |
$2,737 |
|
$23,534 |
6.99% |
77 |
$380.16 |
$29,272 |
$5,738 |
It’s no wonder Americans aren’t saving as much as they should! Keep in mind that this was a relatively inexpensive car. Just imagine the interest charges on a $40,000 car.
Topics: Cars, Credit | 3 Comments »
May 5th, 2006 at 9:33 pm
I prefer the 100% down, no monthly payments plan… I also buy used cars now. Buying a 2 year old pickup (still under warranty) saved me 35% from buying new. Aside from a stain or two I didn’t put on the carpet, I can’t tell the difference.
May 6th, 2006 at 8:50 am
About twenty years ago I read my first finance book. It was written by Andrew Tobias. In it, he stated that if you can’t afford to pay cash for a car, you can’t afford that car. I took his advice and have not taken a loan on a car since. I don’t drive a fancy car, but it gets me to where I want to go and I don’t contribute to the retirement plans of my local banker and car dealer.
May 8th, 2006 at 1:54 pm
Agreed. We have two cars in our family and I financed my last car 3 years ago. One is paid for (disposable) and the other will be paid for in 9 months. Al my future cars will be disposable, meaning that the deductable won’t even cover the cost replacement.