Auto Sales Expected To Grow In 2014 Thanks To 100 Month Financing
Younger buyers and subprime consumers are expected to drive auto sales in 2014, though some banks are already stepping off the accelerator with auto loans due to heavier competition and a desire to protect their margins.
Sales in 2014 are predicted to hit 16.2 million according to J.D. Power & Associates, with millennial buyers and subprime buyers contributing 3.3 million and 2.1 million units, respectively. Both surges in these categories are welcome with automakers, especially younger consumers who would love to be in a car were it not for the Great Recession keeping their wallets at bay.
The growth in sales comes against rising auto prices, which are expected to average $29,700 in 2014. One result: long-term financing in the form financing options that can be amortized over 100 months.
Those seeking loans for their new or used vehicle may need to shop around for financing, however, as some banks — such as Huntington and BB&T — are more interested in protecting their margins than chasing after more market share.
Among the big winners in Q4 2013, Wells Fargo originated $6.8 billion in auto loans, followed by Chase with $6.4 billion, and Capital One with $4.3 billion. Wells Fargo is the industry leader in used-car financing, but does well with new-car loans, as well, particularly in their relationship with General Motors.
A lot of the success comes from tightened lending standards that came as a result of the Great Recession, bringing a number of banks into the low-risk lending party. As economic conditions return to the surface, however, some banks are opting out of expansion into murkier waters for the time being as others cast their nets into the unknown, bringing gradual increases in credit losses as underwriting standards are relaxed to attract more subprime customers and younger buyers.
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From my experience a mercedes will need a5-7K input at 45-50Kmiles. In 8 years car may well go 100K miles. If its a german car and something like the transmission goes, or any number of other bits you are in for 5-10K more. So lest say over the 100k miles you are ptting 20K into repairs, Whereas at 45k on a lease you can jus return it, or it you own it trade it. I would say owning an expensive car out of warrantly especilay a german one is sure financial suicide. Now a new Gm car or Ford truck may well go the diatnce, as would somethig n from Korea or Japan, but aeuro lux car forget ot..
I'm not going to make a blanket statement against a 100 month loan, because there's so many variables that factor into purchasing a vehicle. I've made some pretty bad financial mistakes with car purchases, but I'd like to think I've learned a lot since then. For instance, if you're going to give me a 0% 72 month loan, hell yes I'll take that, and have. The last instance was on a 2009 Silverado, and given the purchase price I negotiated I was above water on the loan in two years, and when I traded it after three years I had $4,000 in equity on it. The factors working for me in this instance were a vehicle that holds it's value well, and a good purchase price. I wouldn't actively seek a 100 month loan, but if they were going to give me one at 0-2%, I might consider it. The other point is this whole $30k average for a new car thing. There are these thing called "used cars" and they can be had at any price point between $0 and that $30k. I honestly believe I will not buy new again.