Loan Terms, Monthly Payments Hit Record Highs In 2014
The easy-credit train keeps on rolling in the auto world, with credit rating agency Experian reporting new records in key auto finance metrics.
Loan terms for new vehicles stretched to 66 months in Q1 2014, up from 65 months a year earlier. Loan terms for used cars grew up 61 months on average, up from 60 months one year prior. The average monthly payment for a new car was up to $474 per month, a 3.3 percent increase year over year, while used car payments ticked up 1.1 percent. The actual amount financed was up to $27,612 for a new car, up 3.6 percent, while for used cars, the amount was $17,927, a 2.3 percent increased.
Experian’s Melinda Zabritski was candid about the cause of the record debt that Americans are now taking on, stating
“As the cost of purchasing a new vehicle continues to rise, consumers clearly are stretching the loan term to help lower monthly payments, keeping them at a manageable level,”
Remember, you heard it here first.
Nearly $45 grand for a Malibu withe interest. really insane. John
Wow...and to think, I moved 8000 miles away to work in a *near* third-world country to make enough in the next three years to wipe my debt out and to be able to buy a modest used car for cash (thinking at most, $12k). What I should have done was simply stay in America and finance my next car for 84 months and relish in that low, low monthly payment.
RE: The Clinton years were solid? Where were you observing from?" I was observing as an investor and from the auto business. You want to name us a more solid economic period in the country than the Clinton years? Yes, there was a tech bubble that burst for people invested in the stock market. That was nothing like the instant subtraction of 38% of household net worth this time around. RE: "Having worked in the tech sector during the implosion of the .com bubble, I'm having a hard time taking you seriously." How serious should we take you as you seem to say that the tech sector equals the entire economy? RE: "An economy built on IPOs for companies whose business models ended with IPO was not a solid one." There is a difference between correlation and causation. The Clinton economy had a lot more going for it than. There has never beena perfect economy. The Reagan economy, for example, was really the Volcker economy. The same could be said about the Bush 43 economy if you substitute the name Greenspan for Volcker. Reagan took office and led us directly into a recession. Or perhaps we should blame Volcker for that since he raised interest rates to fight inflation. Reagan was just along for the ride. Once inflation was beaten back, Volcker and the Fed lowered interest rates and the economy thrived. In the meantime, Reagan rolled back badly needed regulation. Some might recall the S&L meltdown which occurred on Bush 41's watch. Some might recall Black Monday in 1987. Bottom line: Trying to charactize the overall economy by what happens in a single sector isn't accurate. The mortgage crisis, which had its beginnings in the Reagan administration, melted down the world economy. It made the tech bubble look like a lit match next to Haley's comet. We still have TRILLIONS of credit default swaps hanging over our head with only the net worth of the issuers backing them. Estimates range from $50 to "75 TRILLION. By contract, the world has about $7 TRILLION in insurance contracts in force with actual reserves established to pay claims.
The average age of a car in the US is 11.4 years. The average person should be able to drive the average car for the average 11.4 years. Therefore the cost, excluding interest, of a new car is is less than $3000/year. Or $250/month. There is no way around the fact that 30,000 / 60 months is $500. Plus whatever the cost of how they are able or chose to finance it. Why should anyone really care about the term length over which cars are financed? Anyway, why isn't anyone looking at craigslist? The average sales price can't be over $3,000 and they are financed over 0 months. If someone can make bail (on occasion) they can scrounge up enough to find something on craigslist. A luxury vehicle -- one that has 1/4 tank of gas, starts on a good morning, and the tires hold a little air.