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Blog Category: Auto Loans

Can You Afford a 6 Year New Car Loan?

2014 Range Rover

Last month J.D. Power reported that a record 33.1 percent of new vehicles are now being purchased with long-term loans of six years or longer. The primary reason behind this seems to be rising car prices. According to Kelley Blue Book the average priced car now comes in at $32,086.

Auto Loans Get Longer and Cost More

Hyundai Elantra - Premium Style, Economy Price

Five year loans have always been the norm for new car buying but in the fourth quarter of 2012 the average term was 65 months according to Experian Information Solutions. This is due to lenders offering new, longer terms loans with six, seven, and even eight year loans. These longer term loans offer lower monthly payments, allowing buyers to get the cars they want more easily.

Lower payments might seem like a great way to afford more car but there are drawbacks. Longer terms often mean higher interest rates to begin with. Higher interest rates combined with more payments creates significantly higher total cost compared to shorter term loans. In general, the faster a car loan is paid off the lower the overall total cost. 

TransUnion: National Auto Loan Delinquency near record low in 2012

TransUnion Auto Infographic

TransUnion credit agency reports that the national auto loan delinquency rate ended 2012 at a near historic low of 0.41%, down from 0.46% at the end of 2011. This is the ratio of borrowers that are 60 days or more overdue on their payments.  Auto debt per borrower continues to rise as the auto industry remains strong. This level increased to $13,747 in Q4, up 5.4% over the previous year. New loans were up 15.8 year over year and sub-prime loan originations have been increasing to nearly one third of overall auto loans since 2010 when the share of sub-prime auto loans was only 27.6%.