Are People Buying More Expensive Cars with Longer Loan Terms?
November 1, 2013

Are Buyers Buying More Expensive Cars with Longer Loan Terms?

Is this another financial bubble?  When people think of auto loans, they generally think 36 or 48 month loans.  However, there is a huge growth in loans lasting up to 84 months (or 7 years).  The longest-term new car loans of 73-84 months has jumped 25.1% in the past year and now make up 19.5% of total lending.  All other loan terms have become less popular.

Possible reasons for the trend are low interest rates, high average used-car prices, cars lasting longer, or simply wanting nicer cars than they can afford.  These extended loan periods are longer than most people expect to keep their new car.

According to a financial analyst at, “You end up ‘upside down’ owing more than the car is worth for a longer time…you are going to pay down the balance at a snail’s pace while the vehicle depreciates rapidly.”

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As a result of these longer loan terms, there is a greater likelihood that vehicles will be repossessed and the car buyers will be issued deficiency balances.  If this happens to you, consult with a debt settlement attorney to negotiate deficiency balances down.


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