Welcome to the 0Zero economy. It sucks out here in the real world.
More advice from our parents being cast aside. My dad used to say, you should get a three year car loan. He thought four years was the maximum if you need to stretch out and lower the monthly payment. Otherwise , he said, you can’t afford the car.
Such wisdom is seemingly gone with the wind nowadays.
Four years or so out....all these loans will be so far underwater..
8 year loans. My, my
If someone can't successfully finance a new car at those rates and term, I think they should downgrade until they get to a point where they can.
People are holding their cars longer too. The whole math of the situation has changed, used to be a 3 year loan for a 4 or 5 year car, now it’s a 5 or 6 year loan for a 10+ year car.
I don’t know how anyone would think a six or eight year loan made sense, either as the borrower or the lender. If you have to borrow so much that you can’t pay it back in three (at most four) years, you can’t afford that car.
Actually, it makes sense because cars are built better, lasting longer and people no longer are trading them in every 3-5 years. Last one I had was 14 years old and I still sold it within 36 hours of a Craig’s list listing; a 1997 Honda Accord.
These loans have been around a lot longer than indicated.
Good used cars are also expensive, and those loans have been getting longer too.
People get advice not to lease, so instead they get longer loans and end up just as bad. There’s also the obvious change in the vehicles themselves. Using ‘rules’ for auto buying that were common sense when cars were junk at 100k miles don’t make sense when cars are relatively nice at 200k miles.
Car price increases outpace inflation because of the increased regulation on vehicles. Get rid of the regulation, prices can drop as market forces take over.
For example, airbag systems will add a couple thousand to the cost of a new car. If they were optional, the market would drive the cost to a better price. Now, manufactures can basically charge what they want for the system, as long as the total cost of the vehicle doesn’t drop their market share.
For folks starting out in life (read - not much money), that thousand or two can make a big difference. Being able to actually get a car, makes it much easier for folks to improve their lives because otherwise, their time is too consumed w/bus rides, etc..
For myself, if it was optional, I would’ve gotten a non-airbag car when I was starting out. Only getting airbags when my income improved (if even).
People will do almost anything to keep the door of their business open even one more month. We are creatures with poor memories and lots of hope.
How about six years Zero interest?
When I bought a “new” 2003 Honda Accord last year the dealer kept rejecting the price I wanted to pay and stated I could get a new car at 0% for the extended time like 60 or 72 months. The dealer makes more on those extended loans. It looks good until you use a calculator and some common sense.
I knew I could not afford it over the long run. My limit is $10,000 total with tax and all other fees.
Prices have gotten too high. $20K+ over three years is more than the average joe can swing.
I have a 60 month loan on my Tacoma at .99%. Why would I want to pay it off early? I am much better investing my money than having a larger payment just to pay it off in three years.
I boueght a new Jeep at the end of 2012 base price was 19,000 with a 1000 rebate, for a basic jeep patriot no power seats/door locks no navigation or sat radio, just basic, then they added the anti theft lo-jack, a car towing package i didnt want i have AAA, and a repair package i didnt need, tax licence put the price to 30k.. so a 6 yr loan will be a norm