The longer loan terms reflect not only a trend of people seeking a way to offset paying for costlier trucks and SUVs but also inflated prices due to a nationwide vehicle shortage. At today’s car prices, the old rule of thumb is not only being ignored but is also unattainable for most Americans.
“Shrunken inventory continues to wreak havoc on both the new and used vehicle markets,” said Jessica Caldwell, Executive Director of insights. “Shoppers who can actually get their hands on a vehicle are committing to never-before-seen average payments and loan terms.”
In March, 73.4% of financed loans were above 60 months. The most common term was 72 months, followed closely by an 84-month loan. The trend is worse for used car loans. Just over 80% of used car loan terms were over 60 months, with 72 months the most common term.
A longer loan has the carrot on the stick of a more palatable monthly payment, but it comes with a number of drawbacks.
HIGHER INTEREST CHARGES
The longer the term, the more interest you will pay on the loan, both in terms of the rate itself and the finance charges over time. Let’s take a look at how the numbers change on two loans that are on opposite ends of the financial spectrum.
This story is from the April 29, 2022 edition of AppleMagazine.
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This story is from the April 29, 2022 edition of AppleMagazine.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
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