America has a thing for expensive vehicles loaded with the best features. However, it has created a new financial threat for those in the middle-class, the seven-year car loan.
Most car loans take around three to five years to pay off. However, larger and more expensive sport utility vehicles and trucks nt so much so. With that in mind, America has seen a spike in long-term car loans.
America, Home of The Huge Car Loan
When it comes to car loans, one third of new ones have terms that are longer than six years. According to Experian, a credit agency, that is a huge increase from over ten years ago.
During the second quarter of 2019, almost two-thirds of new car loans have terms that are upwards to five years. The loans are averaging 69 months.
However, when it comes to longer car loans, they offer lower monthly payments. Though that may seem price it helps to keep the vehicle more affordable. Unfortunately, they tend to have higher interests rates. Over the long period of time, the car ends up costing more than if the loan was shorter.
Often times, you may find that you will need to buy a new car before the old one is paid off.
But there is another shocking trend sweeping America. According to Edmunds, one third of new car buyers are in debt from previous car loans that roll over onto their new purchase.
According to reports, the average rollover amount is $5,000. With that in mind, rollover amounts make difficult-to-afford new cars even harder to manage.
Car buyers continue to stretch themselves thin, buying cars that they know that they cannot afford. Though it may be tempting, beware of your debt when going for another loan. It is true, America is home of the free and the brave, however that does not make everything free.