The length of car loans in the US keeps on growing as more and more consumers look for ways to save money every month to pay off obligations and necessities. Extremely low interest rates and more durable automobiles have become key factors in driving these new longer-term car loans, which can last anywhere from six to 10 years.

Auto loans used to last four or five years on average, but, in today's cash-strapped era, automakers are more interested in selling cars than profiting from financing, which has resulted in the low interest rates and longer loan terms consumers are seeing today. While some might be concerned that this is the same sort of subprime lending that led to the housing crash in 2008, James Lentz, chief executive of Toyota North America, tells The Detroit News that there's little risk added with these longer loans because defaults typically happen within six months. He also told the newspaper that the longer term options can be the difference between a customer buying a Corolla or a more expensive Camry.

And consider Bradley Gallant's case. The Detroit News reported that he financed a new Honda Accord with a six-year loan at 1.89 percent to divert money to other investments. Compared to a four-year loan on the same car, he saves $130 on his monthly bill and only ends up paying $370 more in interest by the end of the loan. We commend Mr. Gallant on negotiating such loan terms, but it also drives home the point that interest rates must remain low for such loans to be good deals.

In December, we reported that the fastest-growing category in automotive borrowing was the seven-year loan and noted that automakers were reluctant to offer them because it kept customers off the market for too long. Well, apparently, the times they are a-changin' – and they're getting longer.



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    • 1 Second Ago
  • 162 Comments
      Teleny411
      • 1 Year Ago
      Sadly, this is a comment about the declining fortunes of the American middle class.
        Randy
        • 1 Year Ago
        @Teleny411
        Or wanting cars that are out of budget!
        mylexicon
        • 1 Year Ago
        @Teleny411
        Sadly, long term loans are a *cause* of declining fortunes within the American middle class
          Rich
          • 1 Year Ago
          @mylexicon
          I like how someone is voting you down... the simple idea of 'interest' evades them.
        Susan
        • 1 Year Ago
        @Teleny411
        Living it up and spending too much on aspirational purchases ("I "need" that 3-row luxury crossover and the 4000 sq ft McMansion") is a big reason for the decline of the American middle class.
          Teleny411
          • 1 Year Ago
          @Susan
          I don't know if that's true. Americans of the 50s, & 60s drove Olds, Buick, Caddy & Lincoln. They had ranch homes or cape vids which were fashionable then. Tastes have changed, but I wonder if we compare historical salaries, costs, etc., if this generation is living so differently than their grandparents.
        icemilkcoffee
        • 1 Year Ago
        @Teleny411
        Or a comment about the low interest rate and high resale value of used cars.
      express2day
      • 1 Year Ago
      Those who complain about things like safety features pushing car prices up "so high" apparently never shopped for new cars decades ago as prices today are actually lower (adjusting for inflation) for most comparable models versus times past. Cars today are relative bargains. The real issue in recent times is with people wanting and buying more and more car than they should. Too many average income buyers were/are no longer content with Chevrolets, Fords, Hondas, etc. and quickly jumped to the luxury brands and longer term financing, leasing, easy credit, etc. have allowed them to so and extend themselves more and more. The same thing happened in the housing industry with mortgage lengths increasing over time and average families no longer content with 1,500 to 2,000 sq ft houses and instead demanded 2,500 to 3,000+ sq ft houses and the average size of new houses continued to grow and grow. People need to stop trying to keep up with the Joneses so much!
        Justin
        • 1 Year Ago
        @express2day
        How do you figure that cars are bargains today? My mom would always tell how she bought a new Mustang out of high school in 1972. I'm a teacher now so we can use teacher salaries to compare. 1972 stang starts at $2700 and teachers were making about $9000/year. 2013 stang is about $20k and I started at $30k in AZ. The salary about tripled while the MSRP of the Mustang increased about 7.5 times. I can understand the urge to have a nice car but commiting to debt like the article describes just doesn't make sense for a purchase that hemorages in depreciation from the day you buy it.
          CarNutMike
          • 1 Year Ago
          @Justin
          You compared an overall average with your personal starting salary. Our former babysitter started at $60k last September in central NJ. FWIW, the best source I could quickly find (nces.ed.gov) showed overall AVERAGE teacher salaries increased 5.5X from 1972 to 2011. They also increased on an inflation adjusted basis. A 2013 BMW 320i is cheaper on an inflation-adjusted basis than a 1991 BMW 318is. The 2013 is faster, more fuel efficient, bigger (two edged sword there, I guess) and considerably safer both dynamically (electronics) and passively (airbags, structure).
          BarryH
          • 1 Year Ago
          @Justin
          Um, in the last 20+ years car prices haven't really moved. Feature for feature you get way more today for your money than you could in the past.
          FoxJ30
          • 1 Year Ago
          @Justin
          My parents bought a Toyota Cressida in 1992 for $28k. 190hp sedan with leather, CD player, and moonroof. They bought a Toyota Avalon in 2003 for $26k. 210hp sedan with leather, CD player, and moonroof. Today, you can pick up a Camry XLE for $26k. 178hp sedan with leather, CD player, and moonroof. In 20 years, the dollar (number) price of the comparable car has stayed practically static, which suggests that the real price has dropped. Sure, it's gone from Japan made, rear wheel drive, inline 6 to an American made, front wheel drive, inline 4, but the end result of a comfortable midsize sedan with a moderate amount of power has stayed the same, so do the other factors matter that much? Conversely, if we take the $28k from 1992 and multiply through with a 2% inflation rate over 21 years, that's $42k, which would get you a nicely equipped modern day Avalon, which is inarguably a larger, faster, more powerful, and more luxurious car than the 1992 Cressida. If we take that $42k and go backwards in time with it, one could buy a first generation Lexus LS400, which was slightly smaller and somewhat less powerful than today's Avalon. Of course, $42k in the early 90s meant a lot more than it does today.
          express2day
          • 1 Year Ago
          @Justin
          When you include things that buyers typically added then and have more than come to expect today (e.g. air cond, power steering, power brakes, radio, etc.) that early 1970s Mustang price quickly escalated to a figure over $20K (2013 dollars) and for a car still far FAR less equipped than today's models. But, there are numerous examples of how comparable cars today are lower priced, inflation adjusted, than cars of the past at many levels. Add to all of this, for better or worse, the longer available finance terms, leasing opportunities, etc. and today's cars become even cheaper yet payment-wise. The big issue is that too many consumers selfishly want more and more or nicer and nicer instead of being realistic about the car, house, etc. they choose and need to stop trying to keep up with the Joneses so much!
      Lightning
      • 1 Year Ago
      Go as long as you can at 0%. Otherwise if you need more than a 5 year loan chances are you're living outside of your means.
      Ducman69
      • 1 Year Ago
      That's because people are instant gratification dumbasses living a $70K lifestyle on a $50K income. These are the same type of idiots that guy those "no interest no payments for three years" TVs and couches, never putting a penny aside. I have bought every car I've owned with cash and will continue to do so. Yes, it meant I rode a motorcycle until I could afford a used car, but its a lot safer especially in this economy to have $50K or so in savings just in case.
      Dreez28
      • 1 Year Ago
      Taking on huge debts and huge monthly payments that can't even keep up with the rate of decline in equity for a car is a big risk and just plain dumb. I've learned my lesson and I'm never going back. Cash is king.
        Greg
        • 1 Year Ago
        @Dreez28
        There is an in-between. You don't have to get a huge loan. You don't have to chase depreciation. (Also, depreciation only matters if you sell the car. If you keep it till the wheels fall off, it's irrelevant.) There's nothing wrong with putting down a good amount, getting a short loan, paying it off, and receiving the good credit history.
      superchan7
      • 1 Year Ago
      Feature for feature and size for size, car prices have remained flat. Ignoring all of the new safety and convenience features, you still get the same size car (and in some cases, even the same nameplate with increased size) with updated designs for the same uninflated dollar amount. But if you want to shop loaded Camry from 1992 vs. loaded Camry in 2013, that's a dangerous game. Too much feature creep to be a relevant comparison. Base models are more fair.
        BG
        • 1 Year Ago
        @superchan7
        Maybe you should consider feature creep because that is how most modern consumers buy their products. Think of houses - people complain they are so expensive, but your parents or grandparents bought a 1600 sq ft ranch with 1 bathroom and a formica kitchen, and in that successfully raised a family. Today's play shopper wants a 4000 sq ft McMansion with massive kitchen, bedroom suite, "family" room, etc. They simply won't look at modest housing, so their housing cost has risen dramatically. And then they have the audacity to complain about how they can't make ends meet.....
      • 1 Year Ago
      [blocked]
      mylexicon
      • 1 Year Ago
      I am never borrowing money to purchase a new car again. I paid everything on time and I had no issues, but the day the note was paid was one of the best days of my life. No reason to be an indebted slave for a rapidly depreciating vehicle. Some finance people will try to con buyers by persuading them that interest rates are lower than investment returns. If interest rates are lower than marginal investment returns, buy stocks/bonds on margin, not vehicles. If you can't get a loan to purchase investment instruments, you've got no business buying a car that will definitely be worthless in a decade.
      joe shmoe
      • 1 Year Ago
      I can pay cash for a car, but I'd finance at 0% for as long as possible because you can take that financed money and throw it into other investments for a bigger return than the 0% interest you are paying. Financing doesn't always mean you can barely afford it
      AwolG5
      • 1 Year Ago
      A five year loan is the most you should reasonably take out. If you need it to be longer to afford a car they you are clearly shopping way outside your price range.
      NY EVO X MR GUY
      • 1 Year Ago
      A 10 ten year loan on a car? Thats like a second mortgage
      KAG
      • 1 Year Ago
      10 year loans, I think that would last longer than some of the cars and SUVs out there. Makes sense, didn't know there was 10 year car loans, explains why people are driving around in new cars that can't really afford them. In debt until the cars dies.
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