Heard this morning that the average car loan is now 68 months, $503/month, and over $30,000.

While those numbers aren't awful, the fact that they are "average" means some people have much higher numbers. That's just crazy to me.

My 2010 F150 was 60 at $384/mo. Granted, that was with putting down nearly $19k.



This is going to be a problem similar to the housing bubble as people continue to leverage and over extend themselves on credit instead of using savings to pay for large ticket items.

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Heard this morning that the average car loan is now 68 months, $503/month, and over $30,000.

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That is concerning.

That makes a lot of sense because the average Joe in Houston is rolling in a $70,000 vehicle.

31% of new loans in Q1 had amortizations longer than 73 months. Who cares about low interest at that point? For every texags genius playing the arbitrage game, there are 100's who have no clue what that means.

The next loan will be even bigger.
A) cars aren't getting cheaper
B) with that long of a payoff, you will have negative, or minimal, equity when you trade it in.

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This is going to be a problem similar to the housing bubble as people continue to leverage and over extend themselves on credit instead of using savings to pay for large ticket items.

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Surprisingly, the repo rates have dropped. Of course, with a 7 year amort (I've seen refinance options of 6 years), they can manage the payments "better".

People suggest this is the next bubble but how so? The housing bubble was due to the loans being packaged as investment vehicles and sold to investors. I have yet to see an extended term auto loan derivative beings old on the market as a low risk high yield investment opportunity.

While people may default on these loans and get repoed, where is the market wide implication to cause the failure of major banking institutions and bailouts? I just don't see that.

Legitimately asking

The vast majority of people shop for a car based on the monthly payment. A longer amortization makes them think they are getting a better price because the $/month is lower.

72 and 84 months are a long time to finance a vehicle and ideally nobody would enter in to those loans if they didn't have to. However, I will say that cars and more specifically trucks/SUVs seem to be holding their value pretty well these days and most models out there will get you to 125-150k miles of use without any real trouble. My truck is 5 years old and the NADA value is only $10,000 less than what I originally paid for it.

i don't know if it is a bubble, but it sure is insane to me. also pisses me off how much the average price of vehicles has been jacked up due to these people willing to finance for a decade.

I personally, almost always finance my vehicles for 5-6 years to secure a low monthly payment (putting down at least half also), pay it for 12-18 months until it creates another positive data point on my credit history, and then pay the whole thing off. Of course I also never buy a car that I couldn't pay cash for, so I don't know if that truly counts as leverage anyways...

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72 and 84 months are a long time to finance a vehicle and ideally nobody would enter in to those loans if they didn't have to. However, I will say that cars and more specifically trucks/SUVs seem to be holding their value pretty well these days and most models out there will get you to 125-150k miles of use without any real trouble. My truck is 5 years old and the NADA value is only $10,000 less than what I originally paid for it.

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Make/Model/Extras/Mileage plz?

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I personally, almost always finance my vehicles for 5-6 years to secure a low monthly payment (putting down at least half also), pay it for 12-18 months until it creates another positive data point on my credit history, and then pay the whole thing off. Of course I also never buy a car that I couldn't pay cash for, so I don't know if that truly counts as leverage anyways...

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I think the OP is specifically targeting those who go for these 6-8 year notes, put minimum down, and continue to pay on the vehicle for the entire amortization.

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i don't know if it is a bubble, but it sure is insane to me. also pisses me off how much the average price of vehicles has been jacked up due to these people willing to finance for a decade.

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No doubt about that. Although it seems like it's almost standard practice to get an $8k-$10k rebate by just asking and doing a little bit of homework on what cars are really selling for (i.e. true car, auctions, etc.). The folks who just blindly go in and pay the sticker price and get the dealer financing of 6% at 84 months are the ones really getting screwed. However, they have no one to blame but themselves.

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i don't know if it is a bubble, but it sure is insane to me. also pisses me off how much the average price of vehicles has been jacked up due to these people willing to finance for a decade.

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No doubt about that. Although it seems like it's almost standard practice to get an $8k-$10k rebate by just asking and doing a little bit of homework on what cars are really selling for (i.e. true car, auctions, etc.). The folks who just blindly go in and pay the sticker price and get the dealer financing of 6% at 84 months are the ones really getting screwed. However, they have no one to blame but themselves.

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Yes...but they are driving demand up, and settling for a higher price, which in turn drives up the market price.

Not a bubble.

It is amazing that the average person spends so much without even thinking. $500/mo is quite a bit. I will say that financial obligations is at a 30 year low. It basically means that the amount of monthly debt people pay relative to their monthly income has the largest gap since the 80s.

The average person can afford these higher payments better today than in the recent past, but it is crazy to waste it on a vehicle.

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72 and 84 months are a long time to finance a vehicle and ideally nobody would enter in to those loans if they didn't have to. However, I will say that cars and more specifically trucks/SUVs seem to be holding their value pretty well these days and most models out there will get you to 125-150k miles of use without any real trouble. My truck is 5 years old and the NADA value is only $10,000 less than what I originally paid for it.

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Make/Model/Extras/Mileage plz?

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2011 Silverado Crew Cab Z71

Paid $31,500 for it and NADA shows a clean trade-in of $21,100. I bought mine at the height of $4 gas when everyone was downsizing to Camry's and Prius's. Dealer just wanted to get rid of it. It sure helps that the same truck is selling for $50k today.

i bought a Jeep Wrangler. the value they hold is insane plus the new ones just keep getting more expensive. so, i'm in a great place as that goes.

but, at some point, i'll have to buy a new vehicle.

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i bought a Jeep Wrangler. the value they hold is insane plus the new ones just keep getting more expensive. so, i'm in a great place as that goes.

but, at some point, i'll have to buy a new vehicle.

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ugh, My 2008 Tacoma has 126,000 miles. I "want" to hold on to it forever but with twins on the way I "think" I need to get something a newer and more modern.

They hold value, but the cost increases faster. Add in the interest (although minimal), you get further behind every day.

I imagine most who read this post have investments that will offset the interest. Further, I bet that our earning potential is increasing as well. However, I'd wager that 65%+ of long term borrowers will struggle with subsequent new purchases. This would cause the "bubble" to impact the auto manufacturers and dealers somewhere down the line.

It's a possibility I suppose. It wouldn't be so bad if people were just financing houses and cars these days. However, when you add in financing for furniture, boats, ATVs, and education all at the same time, then one of those is likely to fall behind. Throw in some healthy credit card debt from a few vacations and shopping sprees and you have a disaster waiting to happen. Everyone has stories of someone they know who earns really good money, but yet they still live paycheck to paycheck.

I finance vehicles for 60, and have paid off my last two in less than 42 months. Intentionally do it this way in case a job loss or some other major event occurs, I won't be bound to some large monthly payment in a stressful situation. It's costing me a small amount more in interest but smelling to pay it just in case of the above.

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i bought a Jeep Wrangler. the value they hold is insane plus the new ones just keep getting more expensive. so, i'm in a great place as that goes.

but, at some point, i'll have to buy a new vehicle.

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ugh, My 2008 Tacoma has 126,000 miles. I "want" to hold on to it forever but with twins on the way I "think" I need to get something a newer and more modern.

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Assuming the guy doesn't flake, I'm parting ways with my 2001 Tahoe today (bought a new car a few years back, so this one has just been sitting around).

I drove to get it cleaned up at the quarter car wash today, and while it's got a heap full of issues, a ripped up dash, and cracking leather... damn I'm gonna miss that car.

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Heard this morning that the average car loan is now 68 months, $503/month, and over $30,000.

While those numbers aren't awful, the fact that they are "average" means some people have much higher numbers. That's just crazy to me.

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What's more crazy is a lot of people have two of those loans.

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I finance vehicles for 60, and have paid off my last two in less than 42 months. Intentionally do it this way in case a job loss or some other major event occurs, I won't be bound to some large monthly payment in a stressful situation. It's costing me a small amount more in interest but smelling to pay it just in case of the above.

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This. It's free money. We just financed the RIB's car at 60 months because why would I turn back .9% interest? What advantage is there to paying cash?

I do agree that the price of cars has skyrocketed as cheap credit has become available. The same person buying a $50K Lexus right now on a 72 month note would likely not be willing to pay $35K for it cash.

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Heard this morning that the average car loan is now 68 months, $503/month, and over $30,000.

While those numbers aren't awful, the fact that they are "average" means some people have much higher numbers. That's just crazy to me.

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This was us when we bought my wife's new Tahoe in 2013. It didn't make sense to pay cash for the car when the rate was so low. We pay extra each month and will likely have it paid off after 4 years. I don't even remember how many months we financed it for since it didn't matter. I'm betting it was either 60 or 72 though. But, again, it didn't matter since the rate was really low and we would pay it off early. The same goes with our mortgage. We should have it paid off around 10-11 years into the 15 year note.

I cash pay for all of my vehicles. I know it's not the 'smart' thing to do, but I just sort of hate car notes... I do it for 100% psychological reasons and its poor behavioral finance. Liquidity isn't close to an issue for me. And although everyone talks about the excess return they earn in the market on their free money, I would bet the vast majority of folks who allegedly have the cash on hand to pay it off now arent taking their savings and putting it to work in the market vs. on other consumer products and such.

In other words, cash paying might not be 'optimal' but I think not cash paying for most folks leads to worse suboptimal behavior with their money and they don't even know it. It's easier to budget when the cash isn't burning a hole in your pocket and almost everyone is going to give into that cash burning in their pocket eventually.

well said - I am one of those that invests my cash (2k cash in savings only); however, I am one of the only ones that I know that does it.

It is amazing to me how many buy expensive cars. There are plenty out there for 30k or less, but most think they need to drive something higher end than a Corolla.

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There are plenty out there for 30k or less, but most think they need to drive something higher end than a Corolla.

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My thought is "why work so hard to make money if you're not going to enjoy it?" I could work a lot less in a lot less stressful environment if I'd be happy with a Corolla.

That being said, I've bought two cars in the last two years, put 35%+ down and both, and financed for five years at <2%.

I think it's crazy what people pay for cars. Mrs. Fife's car was 3 when we got it, 6 now. I paid cash for it from the seller instead of going to a dealer and it cost all of $14K. No payment, no problems. My DD is a lot older, but I don't mind dealing with the occasional issue that comes up. The commute is only 8 miles each way, so it's not like either of us are racking up the miles anyway.

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i don't know if it is a bubble, but it sure is insane to me. also pisses me off how much the average price of vehicles has been jacked up due to these people willing to finance for a decade.

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No doubt about that. Although it seems like it's almost standard practice to get an $8k-$10k rebate by just asking and doing a little bit of homework on what cars are really selling for (i.e. true car, auctions, etc.). The folks who just blindly go in and pay the sticker price and get the dealer financing of 6% at 84 months are the ones really getting screwed. However, they have no one to blame but themselves.

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Banks loan on longer terms cause these cars last longer. How many of y'all are driving 150k plus cars? My DD has 289k. I drive it everywhere. When I hear someone say that they don't make cars like the used too. I'm glad they don't.

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Banks loan on longer terms cause these cars last longer. How many of y'all are driving 150k plus cars? My DD has 289k. I drive it everywhere. When I hear someone say that they don't make cars like the used too. I'm glad they don't.

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My DD is at 191K ('92 Volvo)
Fun car is around 130K (87 Mercedes)

Neither of these are what I call made like they used to though. There aren't carbs, points or any of that nonsense.

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I finance vehicles for 60, and have paid off my last two in less than 42 months. Intentionally do it this way in case a job loss or some other major event occurs, I won't be bound to some large monthly payment in a stressful situation. It's costing me a small amount more in interest but smelling to pay it just in case of the above.

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This. It's free money. We just financed the RIB's car at 60 months because why would I turn back .9% interest? What advantage is there to paying cash?

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i guess it just depends what you do with the 'free money'
i would guess that most do not invest the difference

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i bought a Jeep Wrangler. the value they hold is insane plus the new ones just keep getting more expensive. so, i'm in a great place as that goes.

but, at some point, i'll have to buy a new vehicle.

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I bought a wrangler too and got a great deal through a family friend who manages a dealership.

I purchased it a year ago, and I can still sell it for the same price I paid for it.

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Not a bubble.

It is amazing that the average person spends so much without even thinking. $500/mo is quite a bit. I will say that financial obligations is at a 30 year low. It basically means that the amount of monthly debt people pay relative to their monthly income has the largest gap since the 80s.

The average person can afford these higher payments better today than in the recent past, but it is crazy to waste it on a vehicle.

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Factor in $300 for cell phones cable and Internet and I bet you close that gap pretty fast