More and more car buyers are opting for stretched car loans, helping lower their monthly payments despite paying more interest over time.
According to J.D. Power and Associates, 30 percent of all financing deals this year have been for six years or longer, with some buyers even opting for 10-year car loans. That figure marks an increase of 23 percent compared to five years ago.
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Over recent years, car loans have been stretching from four or five year loans to six and longer. Automakers have been marketing the longer loans more aggressively, captivating consumers to purchase more expensive models that they normally wouldn’t afford given the monthly payment. “Someone who really has the budget for a Corolla figures if they extend the financing out, they can buy a Camry,” said James Lentz, chief executive of Toyota Motor Corp.’s North American division.
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Of course longer loans do make sense for those that qualify for low interest rates and do the math, especially if they intend to keep their vehicle for a long period of time. Some are investing the difference in their loans to compensate for the additional interest being paid, which could be as little as a few hundred dollars over the life of a loan.
[Source: The Detroit News]