That means monthly payments that last well past when the brake pads give out and potentially beyond when the car gets traded in for a new one. About a third of auto loans for new vehicles taken in the first half of 2019 had terms of longer than six years, according to credit-reporting firm Experian PLC. A decade ago, that number was less than 10%.
Car loans that are increasingly stretched out are a pronounced sign that some American middle class buyers can’t afford a middle-class lifestyle.
Incomes have risen at a sluggish pace in the past decade, but car prices have grown rapidly. New technological and safety features, such as larger and more sophisticated multimedia displays, have made even the most basic cars more expensive. U.S. consumers have also veered toward pricier rides such as sport-utility vehicles that tend to dominate auto showrooms. The result is that consumers are seeking bigger loans than ever to purchase a car.
A seven-year loan on a rapidly depreciating commodity doesn’t seem like the smartest idea.
Although to be fair, today’s cars are much more reliable and longer-lasting, so anyone who doesn’t insist on buying new (and all the newest electronics) can find nice deals on three-year lease returns.