Longer car loans have certain risks
Car loans are getting longer.
According to Experian Automotive, the average auto loan right now is 66 months, the longest it's ever been. A quarter of the loans originated in the first quarter of this year were 73 to 84 months.
A lot of buyers want extended loans in order to reduce their monthly payment. But there are risks associated with borrowing money for six or seven years to buy a car.
"If anything happens - whether your lifestyle changes, your income changes, maybe you have a child and need a different type of car - you're going to be stuck either having to pay some cash to unload that car or end up rolling it into another car loan and you'll be even more upside-down in the next car," explained Gerri Detweiler, director of consumer education at Credit.com.
And consider this: While a longer loan may provide the short-term benefit of smaller monthly payments, in the long-run, it will drive up the total cost of borrowing that money. So do the math, run the numbers and see what really makes sense for you.
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