Dealers: Lengthy Long-Term Financing A Necessary Evil
Though many a dealer knows lengthy long-term financing is a bad deal for all involved, Automotive News reports that attendees at the recent American Financial Services Association’s Vehicle Finance Conference in New Orleans acknowledged that such financing is necessary to do business.
Longer terms and low interest rates have kept the average monthly payment on those loans flat despite increases in loan terms used to finance a new or used vehicle purchase. Currently, the average length of a loan for a new car is at 65 months (used cars are at 61 months), but the fastest-growing category are loan terms from 72 to 84 months, which are likely to leave consumers upside-down come trade-in time; brand and dealership loyalties are also affected negatively by this category.
As for why dealers continue to offer superlong-term financing, varying factors in each consumer, like credit scores and trade-in issues, contribute to the need to offer options in order to make a purchase or lease affordable for the consumer.