Monday, June 01, 2015

Not A Positive Economic Sign: Car Loans Getting Longer

Car loans are now getting longer with the average new car loan clocking in at a whopping 67 months - that's over five and a half years to payoff a new vehicle.

The Detroit Free Press: Car loans keep getting longer

This indicates people can't really afford new cars and are stretching out their payments to be able to afford them.

Between the rising cost of new cars and the demise of people's earning power, this isn't good.

Only the very low interest rate environment we've been in has been keeping the amounts to a possibly tolerable level - and it may be creating a car loan bubble, including a possible sub-prime bubble - just like the housing bubble before it. We all know how well that turned out.

On the upside, it's a lot harder to leverage your car than your house as the car has less to negative equity from the moment you drive a new car off the lot.

Should new car sales slump if interests rates rise or the economy worsens, expect Detroit's auto manufacturers, and the city itself to enter into yet another crisis.

No comments: