NPR: The 7 Year Car Loan

[whatsinaname]

The 7-Year Car Loan: Watch Your Wallet

Americans are buying more expensive cars — nearly $38,000 for new cars, on average. And longer-term loans are enabling many people to make the payments, but at a cost.

www.npr.org

The car loan market keeps getting more and more bloated. I don't know if this is sustainable even with the current economy.

31% at 7 years and 40% at 6 years, and 20% at 5 years.

2% at 8-9 year terms!!

She spent almost exactly what Americans are spending on new cars on average these days — $37,782, according to the car-buying site Edmunds. Americans are buying bigger, pricier cars with more options. And one thing driving this trend is dealers offering car loans with seven-year terms.

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Average of $5000 rollover form previous debt! for about 33% of trade-ins.

For new-car purchases with a trade-in, about a third of people are now rolling over an average of $5,000 of debt from their old car loan into their new car loan, according to the Edmunds site. In other words, they're still paying for a car they no longer own.

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[Officer Big Mac]

I'm driving my car until the wheels fall off or until I can pay off 50% of it up front. Monthly payments suck and are stressful liabilities.

 

[Coyote Zamora]

Never buy a car according to how much the payments are.

Never finance through the dealer unless you're getting 0%

Be ready to walk at any moment.

Veto all dealer add ons

 

[Big Boss]

I never want to finance another car again.

Gonna pay this one off during tax season and pray it lasts me a decade or so.

 

[Pachinko]

Car loans should never be allowed to exceed 5 year terms. If you can't afford 60 months of payments and at least 15% down ... you can't afford the car.

 

[Deleted member 22750]

 

[aerts1js]

so glad i paid off my car 3 years ago.

 

[Vilix]

Never ever get a car according to the monthly payments.

 

[FaceHugger]

Damn. Imagine the interest on those loans.

Sorry we fucked the world up for you guys, millennials. I (gen X) promise we didn't do it on purpose.

 

[FTF]

omg an 84 month car loan that's insane. Please don't do this anyone.

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lol

 

[Deleted member 11985]

If you don't have kids, don't work in construction, and don't consider cars to be a hobby of yours, then just buy from the cheapest models that each manufacturer offers. You can spruce it up with like a $20 ass cushion, and you'd never notice the difference between your $12k car and the other $40k models.

 

[less]

Never buy a car according to how much the payments are.

Never finance through the dealer unless you're getting 0%

Be ready to walk at any moment.

Veto all dealer add ons

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I'm in the process of buying a car myself and all these advices are very useful to keep in mind.

 

[turbobrick]

Car loans should never be allowed to exceed 5 year terms. If you can't afford 60 months of payments and at least 15% down ... you can't afford the car.

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This. If you have to get a 7 year loan for a car, you probably can't afford the car.

Luckily I've never had a car loan and don't plan on ever getting one.

 

[thewienke]

I don't know how people do it because my wife and I make into the very low six figures and my car payment for our Golf R of $634 a month from a $36,000 60mo loan at 2% interest really sucks.

People who are far less fortunate than us are taking out massive loans for pickups and SUVs and those just seem to get more and more expensive as time goes on. Then tack on rising costs of housing, daycare, health care, etc and I just don't see how people do it.

If we didn't have the hatchback, I'd probably consider a minivan for when we have kids.

 

[caff!!!]

If you don't have kids, don't work in construction, and don't consider cars to be a hobby of yours, then just buy from the cheapest models that each manufacturer offers. You can spruce it up with like a $20 ass cushion, and you'd never notice the difference between your $12k car and the other $40k models.

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"but I need a car my little jimmy can be safe in" says the helicopter mom buying their kid an Ford Expedition

 

[thekonamicode]

The last car I purchased (Scion iA) was $17000 new, no money down, zero % APR and I did whatever the longest finance option they had available. I love my car!

 

[Walter White Walker]

Car prices and loan lengths have just gotten insane.
I got my car in 2004 and it's still going, albeit all sorts of things have gone south in the past few years. Once I do replace it I refuse to spend very much.

 

[Deleted member 1086]

Bought a 2015 Mustang GT earlier this year for about 26k on a six year loan, but am putting at least $600 a month on it right now in the hope to pay it off in 5 years or even under. It sucks spending $600 a month on a car, but as long as I can swing it it's going to save me money in the long run.

 

[Figgles]

I don't know how people do it because my wife and I make into the very low six figures and my car payment for our Golf R of $634 a month from a $36,000 60mo loan at 2% interest really sucks.

People who are far less fortunate than us are taking out massive loans for pickups and SUVs and those just seem to get more and more expensive as time goes on. Then tack on rising costs of housing, daycare, health care, etc and I just don't see how people do it.

If we didn't have the hatchback, I'd probably consider a minivan for when we have kids.

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You should have skipped the overpriced VW.

 

[thewienke]

You should have skipped the overpriced VW.

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There's not another AWD hot hatch with an automatic and a nice interior on the market though.

My car does absolutely everything I could ever want - it's fast, it's comfortable, handles extremely well, and still hauls groceries. I've never loved a car this much!

 

[TheMango55]

I paid about 40% down and had a 3 year loan on my last car. I even paid it off with 4 months to go when I got my tax return a few years ago.

So nice not having a car payment.

 

[GungHo]

I buy with cash unless I can get 0%. I'm sure as shit not paying for the thing for 7 goddamn years. It's bad enough paying the maintenance on a 7 year old car. Still paying a note? That's fucking insane.

 

[Soda]

Car, student, and home loans in the USA are mostly huge traps for people. It's going to hit a wall eventually.

 

[Coyote Zamora]

I paid about 40% down and had a 3 year loan on my last car. I even paid it off with 4 months to go when I got my tax return a few years ago.

So nice not having a car payment.

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Change your tax rate, don't use taxes like a savings account you can do more with the money every month instead of giving the government tax free loans

 

[Landy828]

There's not another AWD hot hatch with an automatic and a nice interior on the market though.

My car does absolutely everything I could ever want - it's fast, it's comfortable, handles extremely well, and still hauls groceries. I've never loved a car this much!

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Holy crap at the price of that model!

I just looked it up and that's insane how much they go for. I bought a brand new Ford Explorer that seats 7, has well into the 300 plus horsepower range with an i4 turbo, and gets okay gas mileage for its size.

After taxes and tags I paid like $5,000 less than that Volkswagen cost you guys. My payments are only $449 a month. The specs on that VW are pretty nice though.

 

[wild_fire]

Average of $5000 rollover form previous debt! for about 33% of trade-ins.

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This part is really crazy to me...

 

[Wetwork]

Swear to god, once this Crosstrek is paid off I'm not buying another until the wheels fall off. 6 years is long enough and I only have 4 more to go.

 

[whatsinaname]

There's not another AWD hot hatch with an automatic and a nice interior on the market though.

My car does absolutely everything I could ever want - it's fast, it's comfortable, handles extremely well, and still hauls groceries. I've never loved a car this much!

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The Golf R is lovely but the Mazda3 2019 is quite nice too (and has an awd model but I haven't driven that). $10k cheaper.

 

[turbobrick]

Holy crap at the price of that model!

I just looked it up and that's insane how much they go for. I bought a brand new Ford Explorer that seats 7, has well into the 300 plus horsepower range with an i4 turbo, and gets okay gas mileage for its size.

After taxes and tags I paid like $5,000 less than that Volkswagen cost you guys. My payments are only $449 a month. The specs on that VW are pretty nice though.

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They're not really comparable vehicles. The Golf R is a sports car that just happens to also be a 5 door hatchback.

 

[Jarmel]

You should have skipped the overpriced VW.

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Gulf R is actually fairly good.

 

[gdt]

Car loans should never be allowed to exceed 5 year terms. If you can't afford 60 months of payments and at least 15% down ... you can't afford the car.

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Don't put jack shit down.

But yes, I wouldn't take over a 5 year loan.

 

[Dr. Feel Good]

the loan market is a sliver of what the housing crisis was so don't expect this to crash the economy if there's some rapid default rate

 

[Jarmel]

The Golf R is lovely but the Mazda3 2019 is quite nice too (and has an awd model but I haven't driven that). $10k cheaper.

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That's not a comparable car in terms of performance. It all depends on what you want out of a car.

 

[Rackham]

I need a new car.

 

[Officer Big Mac]

I need a new car.

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Everyone check under your seats for a big surprise!

 

[LakeEarth]

I got my car at 0% and I still went with 5 years even though 7 is an option. That's just way too long.

 

[Razgriz417]

i only learned this recently but regardless of what finance offer you get from the dealer, you can always refinance later to a lower rate. Most of the time just costs the licencing fees

 

[FaceHugger]

Swear to god, once this Crosstrek is paid off I'm not buying another until the wheels fall off. 6 years is long enough and I only have 4 more to go.

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I bought my latest car outright. Never getting a car loan again. I plan on driving this car I have now for another year then getting a SUV because I am getting old and don't want to drive coupes any longer (I'd rather slide into my drivers seat rather than climb into it). If that makes sense.

 

[Rackham]

Everyone check under your seats for a big surprise!

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It was just sandwich wrappers :(

 

[VulcanRaven]

Not everyone with big payments that need to stretch it out are being lavish and overbuying what they need

I'm in the process of rebuilding my terrible credit and the only company that would give me a loan a year ago was Ally

I bought a 3 year old used Honda Accord with 24k miles for like 16000

but my interest rate is over 11% and I pay 340 dollars a month

so I had to take the 6 year loan on that, I couldn't afford more than 340 a month

hoping my next car purchase is easier, but a used Honda Accord is about as practical as you can get so I didn't exactly go buy some fancy car, it's entry level

 

[scottbeowulf]

Paying off my 5 year loan next month. So hyped for the extra money each month. I'd never get more than a five year loan. I'd prefer 3 years tops.

 

[MrNewVegas]

I've had two 5 year loans now. Both zero interest. I've bought the best entry level vehicle. First one was 21,000CAD in 2010, my latest one was 19,000CAD in 2018.

The 3 years between my old and new car was not fun. I didn't like having to deal with maintenance and all that Jazz. Funny enough once my first one was paid off I said never again. I prefer having a warrantee vehicle.

My last one went in reverse when I put it in drive. The very next day I went and traded it in to get my new one lol.

 

[Allforce]

I don't understand what the problem is with a 7 year loan? I bought each of our cars with a 7 year back in 2012. Each one was 20K, I paid 291 for one payment and 303 for the other.

I think I had about 750 bucks in trade-in on the first car and 3-4K on the second so I guess that knocked it down a bit but what's the issue? 7 year let me get a payment I was comfortable making on 2 cars I wanted.

Edit: Never mind I did the ERA thing where I didn't even bother reading the article, sorry. Interest is higher and if you fuck up and have to sell then you are underwater. Interest I guess doesn't bother me, price of doing business. And I suppose I got lucky that I actually paid them both off and never considered trading them in...

 

[Bob Beat]

Never buy a car according to how much the payments are.

Never finance through the dealer unless you're getting 0%

Be ready to walk at any moment.

Veto all dealer add ons

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Buy used and try to pay it off with cash.

Add that in bold as 1, 2, 3, 4 and 5.

Last car I bought was a 2008 in 2011. I think it was for 18k on a Honda Accord. I can't remember the exact details. But that saved me at least 10k vs it being new. No note November in full effect.

 

[Deleted member 35217]

Just finished a five year loan last month and vehicle is still in great shape, knock on wood, putting the extra money towards other bills but should keep in mind squirreling some away for a down payment on the next ride.

 

[Deleted member 19003]

I had some shady car salesmen try to trick me by changing my documents from 5 year loans to 7 years and presenting it as them "lowering the price" -- assholes.

 

[Officer Big Mac]

It was just sandwich wrappers :(

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Oh. Sorry. I parked some cars under there earlier.

 

[turbobrick]

I don't understand what the problem is with a 7 year loan? I bought each of our cars with a 7 year back in 2012. Each one was 20K, I paid 291 for one payment and 303 for the other.

I think I had about 750 bucks in trade-in on the first car and 3-4K on the second so I guess that knocked it down a bit but what's the issue? 7 year let me get a payment I was comfortable making on 2 cars I wanted.

Edit: Never mind I did the ERA thing where I didn't even bother reading the article, sorry. Interest is higher and if you fuck up and have to sell then you are underwater. Interest I guess doesn't bother me, price of doing business. And I suppose I got lucky that I actually paid them both off and never considered trading them in...

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They gave you only $750 for your trade in? I don't even know what car it was but that's a terrible deal.

 

[Charismagik]

I remember when 4 year loans seemed long as hell. I hate cars so much and wish I didn't have to throw away money on them. I bought my last one new and have had it for almost 12 years lol

 

[Vagabond]

I'm in the market for a new car and it seems like dealers have 0% APR promotions going year round. However as credit becomes more important and harder to keep up with, people are making less and are less able to make the down payment, and predatory lending has made a rebound in recent years, this does not surprise me.