7 ms·

The Average New Car Loan Is Now over 70 Months

25 points by luu 6y ago

awinder 6y ago
I had a real psychological aversion when doing this with my wife’s new car, but at a certain point why would you not extend the loan at free money rates?
- mc32 6y ago
  It's definitely something I would think about: By the time it's paid off, it's almost time to think about trading in for a new one. Obviously not necessary, but that's half the ave age of cars on the road.
- davidgh 6y ago
  It seems to me people spend a whole lot more on cars when they are allowed to shop based on “monthly price” rather than “purchase price”. When the dealer is offering that comfort, convenience or sport package, it’s sure a lot easier to say yes to $20 a month than $2,000 today. Stretching the loan term makes it that much easier to overspend. At least in the United States, one of the best things that the average middle class person could do to improve their long term financial situation would be to buy cars with a lower purchase price and keep them longer.
  - Teknoman117 6y ago
    That's why I'm still driving my '04 Expedition. Parents bought it in 2008 and I've been taking good care of it since I bought it off them. Still runs great even though it's now a 17 year old vehicle with 250k miles. Can I afford to drive a nice new car? sure, but why would I (other than getting way better gas mileage...)? Practically worthless for trade-in, so might as well keep driving it until something really expensive breaks. It's not like SUV design has changed much. Modern ones just have silver front-ends versus body color.
    - mgkimsal 6y ago
      > so might as well keep driving it until something really expensive breaks. Drove my 04 Sebring until 2017 - 236k miles - would liked to have fixed the last problem, but... mechanic wasn't quite sure that even if I fixed it, it would pass inspection without even more work. it was basically non-running and would have taken up close to $2k with no guarantee of how much longer it would have gone. As much as I hated to do it, I moved to a 2016 (1 year old at the time) focus. Sebring was... 25mpg - focus is getting me around 35-36 - 40+ on longer trips, but haven't had any since covid.
    - op00to 6y ago
      > why would I Safety?
      - tonyedgecombe 6y ago
        I'm sure the car manufacturers would like you to think that.
    - steve_adams_86 6y ago
      I thought new cars are just new versions of the same old thing, but after extensive shopping around I bought a (very new to me) 2017 Toyota Highlander Limited. Somehow it seats more, fits more, pulls more, drives so much nicer, has heaps of safety features I actually use, and uses less fuel than my previous vehicle. It does everything I want better than anything I’ve had could. It’s very much a ‘have your cake and eat it’ thing for me. I had no idea cars could be this nice. I’ve limped older vehicles along for nearly 20 years now, and... I feel weird saying it, but I love this thing, and I would buy new(ish) again. Cars have changed.
      - mgkimsal 6y ago
        and... they keep changing, somewhat. it's incremental year to year - most 2015-2016 changes weren't noticeable. But comparing a 2000 to a 2014, for example, you'll notice a lot of differences. most of my used car purchases have been 'newish' (like... 3-4 years old), and I had them for a few years. I got 2004 (new) and had it for 13 years - a lot changed in that time period! As you say, safety, fuel economy, gadgets (rear camera, etc).
javagram 6y ago
Article is from April 1, 2020, the headline should be tagged to reflect it was from a very specific economic moment this year... Moreover the article itself is questionable as it spins a change from 69.6 in March 2019 to 70.6 in March 2020 as “mad” despite the fact that interest rates changed from 6.4% to 5.8%.
GaryNumanVevo 6y ago
I'm a few months away from paying off a car loan $86k, 36 month, APR was negligible at %1.2. The term sheet easily could have been extended to 70 months, however, I wanted the option to resell the car before any long term (and expensive) issues popped up. Sure the monthly would have been MUCH cheaper, but the hidden cost of additional out-of-warranty maintenance / hassle of trying to transfer an auto loan is a PITA. Honestly, if I had to do it again, I would just lease hack a nice BMW just so I can hand it back to the dealer no questions asked.
- ponker 6y ago
  Gary Numan on HN? Now I’ve seen everything.
  - gedy 6y ago
    I'm assuming it's not really him, or is it??
    - GaryNumanVevo 6y ago
      sorry to disappoint, just a fan of his
      - gedy 6y ago
        Same here!
- bsder 6y ago
  > I would just lease hack a nice BMW just so I can hand it back to the dealer no questions asked. At least in the US, the lease terms seem to be uniformly terrible. Mileage allowances are absymal. And you're completely hosed if you get an accident that totals the car out. If the car doesn't come back at the value expected in the lease, you're on the hook for the difference. Given that kind of risk, you might as well buy the car and keep the residual value for yourself. I haven't seen a car lease with terms that didn't suck in years.
AtlasBarfed 6y ago
The average selling price of cars, uh, I mean SUV/CUVs is getting higher and higher. Pickup trucks average selling prices are practically in luxury sedan ranges. As stated in comments, cheap financing definitely helps this, as does the fact that current cars really are so much better than cars 20 years ago, to say nothing of cars from the 80s or (shudder) 70s. A lot is the luxury feature set, but a lot is just people buying very gaudy horsepower drivetrains. EV drivetrains will rapidly eclipse ICE drivetrains in price, and they are almost trivial to design for very good acceleration (which really is all that gets used daily for "sporty" cars). The joke is Americans buy horsepower but drive torque is very apropos. A simple EV drivetrain can deliver very high torque at the low end, while equivalent torque is really expensive for an engine. So that will leave software (which commoditizes quickly as well) and luxury features. But I think the average price will come back.
- runamok 6y ago
  I read recently there are less than 20 cars for sale in the US under 20k. https://jalopnik.com/heres-all-17-cars-available-in-the-u-s-right-now-for-l-1844641724 https://jalopnik.com/heres-all-17-cars-available-in-the-u-s-...
  - brianwawok 6y ago
    Very low for sure. If you bump it to 3-year old used cars under 20k, I think you can get a much bigger chunk of vehicles. In a car that will last 15 years, 3 years old is not a huge deal.
cwhiz 6y ago
Bigger takeaway for me is that the average APR is 5.8%. That’s high in the era of free money. Another huge detail, just casually mentioned at the bottom is that 12.8% of buyers are financing at rates above 10%. That’s insane.
- naikrovek 6y ago
  I've never gotten a car loan for less than 12% even once. My real name is the same as a fictional title character from one movie made in 1972, so I am considered high risk no matter what my credit rating is. That's what they told me, anyway. You people getting low interest on things ... I hate all of you. (Tongue in cheek hate of course)
  - Gunax 6y ago
    I earnestly cannot tell if this is a joke or not. I see no reason someone with excellent credit would get such bad terms.
  - mey 6y ago
    That sounds like a lawsuit
    - cwhiz 6y ago
      There is no way it is true. Credit reporting agencies don’t consider your name when assessing your credit. The only way it could be true is if it is such a peculiar name that he is constantly the victim of identity theft.
  - 1123581321 6y ago
    Deep Throat?
2Gkashmiri 6y ago
Why? I mean someone from India where cars start from 300k inr or us$4000. Why do Americans need to buy cars pricing so much, $40k and then not afford them outright meaning leasing and interest? If you cant afford a "big car" outright, why not buy a cheaper one ?
- tonyedgecombe 6y ago
  It didn't happen by accident. It takes a huge amount of marketing and PR to convince people. People are told they can't be a good father without the latest SUV or if they buy this sleek saloon their wife will suddenly loose 100 pounds or a new sports car is going to make them ten years younger. Governments are easily coerced into supporting this through road building programs or wars to keep the cost of oil down. You might think someone able to accumulate a reasonable amount of money is more rational but then I just read that Aston Martin sales are suffering because the latest James Bond film is late. I doubt India will be any different, you will be catching up soon enough.
- 1123581321 6y ago
  A lot of people see a car as a perpetual monthly expense and they are fine with that. Rather than seeing an 84-month loan as a large debt, they see a manageable expense. Outside of COVID, people are generally optimistic about their income staying the same or rising. Also, cars are pretty neat and we have access to the best from around the world. It’s a popular hobby here to be interested in nice cars and trucks and enjoy driving them. The country is huge and beautiful so driving is rewarded by the destinations. Safety is also valued, so many people prefer to do mundane commuting in a more recent car with better rated airbags and crumple zones. So to many people it’s worth getting an expensive car years earlier than paying cash, if they even consider paying cash.
- brianwawok 6y ago
  So the 4k car would not pass our safety tests. So can't really compare that to American cars. The cheapest "full size" car I know (not smart car or similar) is something like a Toyota Yaris (~15k base), most manufactures have something around here. They have 4 seats and passes all the safety tests. For why finance: I counter with - why not. If I can buy something nicer than I can afford outright, with a payment that fits in my budget, why not? Borrowing money is a fanatic tool when used responsibly. Sure I could wait until I am 50 and save up the cash to buy a house.. or I can take out a loan and buy one at 22, and get 28 more years of enjoyment out of my house.
Gunax 6y ago
There's no such thing as a 0% loan. That just means the interest is built into the price. Anyway, if you have poor credit and need a car, I don't think there is anything wrong with paying 10% interest... but please don't buy a 35k vehicle then. There are plenty of used, reliable cars less than 10k.
happyjack 6y ago
Am I the only one here that drives a 19 year old truck?
- effingwewt 6y ago
  Not at all. I've always paid cash for my vehicles and my favorite vehicles I've owned were a 1972 chevy shortbed truck with three on the floor, and a 1986 camaro rs. I could work on both no matter the issue, both had more than enough room under the hood to work on damn near everything. Now I own a 2009 bmw 328i, again paid cash. However I can't change my oil, heaven forbid something big breaks, ac goes out, etc. I will have to take it to a specialist or a dealership to keep service records up to date etc. I'd pay what I paid my bmw to have either my truck or camaro back. I've had several vehicles throughout my life, and as much as I love driving my bmw I'd make a straight trade right now. As an aside- I blew the engine out on my camaro (original owner had done a home bore-job and left pits which cause structural weakeness in my engine block and one day while driving normally a piston slammed through the sidewall. A 'new' v8 350 engine installed was about 1.5k, this was about 1998, and on a car I'd bought for 1k cash. That's cheaper than replacing all 4 brake/rotor on my bmw by a good bit. My drive shaft on my truck broke when a geo metro t-boned me in my work parking lot. No body damage. 200 for the shaft 100 for installation. I cant imagine what would happen to my bmw if tboned, much less the cost of repairs. I miss the old days :(
  - mxxx 6y ago
    Yeah it’s a crappy trend across all manufacturing really, the lack of access to fix your own stuff.
  - happyjack 6y ago
    I always pay cash, too! I don't have a commute (walk or bike to work) and live in a small town. I use my truck to go to the mountains or drive to the airport. I have a Gen 1 Tacoma. I used to be a big fan of German engineering, but I'm afraid it is too stringent on maintenance records and specialty systems. If you don't change the oil at 3241 miles and check the wiper fluid at every 1001 mile interval, the car is going to blow up. And Jurgen will not care; you must read ze manual! We write ze manual for a reason!
bjoli 6y ago
Who is surprised? I have with the inequalities of Western society only growing, and interests being reidiculously low, a large part of the population is financing their consuming with loaned money. We have spent the last 30 years making the rich richer (and boy are they good at piling that money up), and the people who are supposed to have the purchasing power to drive demand have seen an ever shrinking part of the created wealth, and thus have to use loans. I am scared of what normalized interest rates will do.
room505 6y ago
I always share and discuss this link with friends and family https://www.financialsamurai.com/the-110th-rule-for-car-buying-everyone-must-follow/ https://www.financialsamurai.com/the-110th-rule-for-car-buyi... I bought a one year old used Mazda 3 from Hertz for 11k out the door. It had a few scratches and 40k miles. It still had that new car smell.

25 points by luu 6y ago

I had a real psychological aversion when doing this with my wife’s new car, but at a certain point why would you not extend the loan at free money rates?

mc32 6y ago
It's definitely something I would think about: By the time it's paid off, it's almost time to think about trading in for a new one. Obviously not necessary, but that's half the ave age of cars on the road.
davidgh 6y ago
It seems to me people spend a whole lot more on cars when they are allowed to shop based on “monthly price” rather than “purchase price”. When the dealer is offering that comfort, convenience or sport package, it’s sure a lot easier to say yes to $20 a month than $2,000 today. Stretching the loan term makes it that much easier to overspend. At least in the United States, one of the best things that the average middle class person could do to improve their long term financial situation would be to buy cars with a lower purchase price and keep them longer.
- Teknoman117 6y ago
  That's why I'm still driving my '04 Expedition. Parents bought it in 2008 and I've been taking good care of it since I bought it off them. Still runs great even though it's now a 17 year old vehicle with 250k miles. Can I afford to drive a nice new car? sure, but why would I (other than getting way better gas mileage...)? Practically worthless for trade-in, so might as well keep driving it until something really expensive breaks. It's not like SUV design has changed much. Modern ones just have silver front-ends versus body color.
  - mgkimsal 6y ago
    > so might as well keep driving it until something really expensive breaks. Drove my 04 Sebring until 2017 - 236k miles - would liked to have fixed the last problem, but... mechanic wasn't quite sure that even if I fixed it, it would pass inspection without even more work. it was basically non-running and would have taken up close to $2k with no guarantee of how much longer it would have gone. As much as I hated to do it, I moved to a 2016 (1 year old at the time) focus. Sebring was... 25mpg - focus is getting me around 35-36 - 40+ on longer trips, but haven't had any since covid.
  - op00to 6y ago
    > why would I Safety?
    - tonyedgecombe 6y ago
      I'm sure the car manufacturers would like you to think that.
  - steve_adams_86 6y ago
    I thought new cars are just new versions of the same old thing, but after extensive shopping around I bought a (very new to me) 2017 Toyota Highlander Limited. Somehow it seats more, fits more, pulls more, drives so much nicer, has heaps of safety features I actually use, and uses less fuel than my previous vehicle. It does everything I want better than anything I’ve had could. It’s very much a ‘have your cake and eat it’ thing for me. I had no idea cars could be this nice. I’ve limped older vehicles along for nearly 20 years now, and... I feel weird saying it, but I love this thing, and I would buy new(ish) again. Cars have changed.
    - mgkimsal 6y ago
      and... they keep changing, somewhat. it's incremental year to year - most 2015-2016 changes weren't noticeable. But comparing a 2000 to a 2014, for example, you'll notice a lot of differences. most of my used car purchases have been 'newish' (like... 3-4 years old), and I had them for a few years. I got 2004 (new) and had it for 13 years - a lot changed in that time period! As you say, safety, fuel economy, gadgets (rear camera, etc).

javagram 6y ago

Article is from April 1, 2020, the headline should be tagged to reflect it was from a very specific economic moment this year... Moreover the article itself is questionable as it spins a change from 69.6 in March 2019 to 70.6 in March 2020 as “mad” despite the fact that interest rates changed from 6.4% to 5.8%.

GaryNumanVevo 6y ago

I'm a few months away from paying off a car loan $86k, 36 month, APR was negligible at %1.2. The term sheet easily could have been extended to 70 months, however, I wanted the option to resell the car before any long term (and expensive) issues popped up. Sure the monthly would have been MUCH cheaper, but the hidden cost of additional out-of-warranty maintenance / hassle of trying to transfer an auto loan is a PITA. Honestly, if I had to do it again, I would just lease hack a nice BMW just so I can hand it back to the dealer no questions asked.

ponker 6y ago
Gary Numan on HN? Now I’ve seen everything.
- gedy 6y ago
  I'm assuming it's not really him, or is it??
  - GaryNumanVevo 6y ago
    sorry to disappoint, just a fan of his
    - gedy 6y ago
      Same here!
bsder 6y ago
> I would just lease hack a nice BMW just so I can hand it back to the dealer no questions asked. At least in the US, the lease terms seem to be uniformly terrible. Mileage allowances are absymal. And you're completely hosed if you get an accident that totals the car out. If the car doesn't come back at the value expected in the lease, you're on the hook for the difference. Given that kind of risk, you might as well buy the car and keep the residual value for yourself. I haven't seen a car lease with terms that didn't suck in years.

AtlasBarfed 6y ago

The average selling price of cars, uh, I mean SUV/CUVs is getting higher and higher. Pickup trucks average selling prices are practically in luxury sedan ranges. As stated in comments, cheap financing definitely helps this, as does the fact that current cars really are so much better than cars 20 years ago, to say nothing of cars from the 80s or (shudder) 70s. A lot is the luxury feature set, but a lot is just people buying very gaudy horsepower drivetrains. EV drivetrains will rapidly eclipse ICE drivetrains in price, and they are almost trivial to design for very good acceleration (which really is all that gets used daily for "sporty" cars). The joke is Americans buy horsepower but drive torque is very apropos. A simple EV drivetrain can deliver very high torque at the low end, while equivalent torque is really expensive for an engine. So that will leave software (which commoditizes quickly as well) and luxury features. But I think the average price will come back.

runamok 6y ago
I read recently there are less than 20 cars for sale in the US under 20k. https://jalopnik.com/heres-all-17-cars-available-in-the-u-s-right-now-for-l-1844641724 https://jalopnik.com/heres-all-17-cars-available-in-the-u-s-...
- brianwawok 6y ago
  Very low for sure. If you bump it to 3-year old used cars under 20k, I think you can get a much bigger chunk of vehicles. In a car that will last 15 years, 3 years old is not a huge deal.

cwhiz 6y ago

Bigger takeaway for me is that the average APR is 5.8%. That’s high in the era of free money. Another huge detail, just casually mentioned at the bottom is that 12.8% of buyers are financing at rates above 10%. That’s insane.

naikrovek 6y ago
I've never gotten a car loan for less than 12% even once. My real name is the same as a fictional title character from one movie made in 1972, so I am considered high risk no matter what my credit rating is. That's what they told me, anyway. You people getting low interest on things ... I hate all of you. (Tongue in cheek hate of course)
- Gunax 6y ago
  I earnestly cannot tell if this is a joke or not. I see no reason someone with excellent credit would get such bad terms.
- mey 6y ago
  That sounds like a lawsuit
  - cwhiz 6y ago
    There is no way it is true. Credit reporting agencies don’t consider your name when assessing your credit. The only way it could be true is if it is such a peculiar name that he is constantly the victim of identity theft.
- 1123581321 6y ago
  Deep Throat?

2Gkashmiri 6y ago

Why? I mean someone from India where cars start from 300k inr or us$4000. Why do Americans need to buy cars pricing so much, $40k and then not afford them outright meaning leasing and interest? If you cant afford a "big car" outright, why not buy a cheaper one ?

tonyedgecombe 6y ago
It didn't happen by accident. It takes a huge amount of marketing and PR to convince people. People are told they can't be a good father without the latest SUV or if they buy this sleek saloon their wife will suddenly loose 100 pounds or a new sports car is going to make them ten years younger. Governments are easily coerced into supporting this through road building programs or wars to keep the cost of oil down. You might think someone able to accumulate a reasonable amount of money is more rational but then I just read that Aston Martin sales are suffering because the latest James Bond film is late. I doubt India will be any different, you will be catching up soon enough.
1123581321 6y ago
A lot of people see a car as a perpetual monthly expense and they are fine with that. Rather than seeing an 84-month loan as a large debt, they see a manageable expense. Outside of COVID, people are generally optimistic about their income staying the same or rising. Also, cars are pretty neat and we have access to the best from around the world. It’s a popular hobby here to be interested in nice cars and trucks and enjoy driving them. The country is huge and beautiful so driving is rewarded by the destinations. Safety is also valued, so many people prefer to do mundane commuting in a more recent car with better rated airbags and crumple zones. So to many people it’s worth getting an expensive car years earlier than paying cash, if they even consider paying cash.
brianwawok 6y ago
So the 4k car would not pass our safety tests. So can't really compare that to American cars. The cheapest "full size" car I know (not smart car or similar) is something like a Toyota Yaris (~15k base), most manufactures have something around here. They have 4 seats and passes all the safety tests. For why finance: I counter with - why not. If I can buy something nicer than I can afford outright, with a payment that fits in my budget, why not? Borrowing money is a fanatic tool when used responsibly. Sure I could wait until I am 50 and save up the cash to buy a house.. or I can take out a loan and buy one at 22, and get 28 more years of enjoyment out of my house.

Gunax 6y ago

There's no such thing as a 0% loan. That just means the interest is built into the price. Anyway, if you have poor credit and need a car, I don't think there is anything wrong with paying 10% interest... but please don't buy a 35k vehicle then. There are plenty of used, reliable cars less than 10k.

happyjack 6y ago

Am I the only one here that drives a 19 year old truck?

effingwewt 6y ago
Not at all. I've always paid cash for my vehicles and my favorite vehicles I've owned were a 1972 chevy shortbed truck with three on the floor, and a 1986 camaro rs. I could work on both no matter the issue, both had more than enough room under the hood to work on damn near everything. Now I own a 2009 bmw 328i, again paid cash. However I can't change my oil, heaven forbid something big breaks, ac goes out, etc. I will have to take it to a specialist or a dealership to keep service records up to date etc. I'd pay what I paid my bmw to have either my truck or camaro back. I've had several vehicles throughout my life, and as much as I love driving my bmw I'd make a straight trade right now. As an aside- I blew the engine out on my camaro (original owner had done a home bore-job and left pits which cause structural weakeness in my engine block and one day while driving normally a piston slammed through the sidewall. A 'new' v8 350 engine installed was about 1.5k, this was about 1998, and on a car I'd bought for 1k cash. That's cheaper than replacing all 4 brake/rotor on my bmw by a good bit. My drive shaft on my truck broke when a geo metro t-boned me in my work parking lot. No body damage. 200 for the shaft 100 for installation. I cant imagine what would happen to my bmw if tboned, much less the cost of repairs. I miss the old days :(
- mxxx 6y ago
  Yeah it’s a crappy trend across all manufacturing really, the lack of access to fix your own stuff.
- happyjack 6y ago
  I always pay cash, too! I don't have a commute (walk or bike to work) and live in a small town. I use my truck to go to the mountains or drive to the airport. I have a Gen 1 Tacoma. I used to be a big fan of German engineering, but I'm afraid it is too stringent on maintenance records and specialty systems. If you don't change the oil at 3241 miles and check the wiper fluid at every 1001 mile interval, the car is going to blow up. And Jurgen will not care; you must read ze manual! We write ze manual for a reason!

bjoli 6y ago

Who is surprised? I have with the inequalities of Western society only growing, and interests being reidiculously low, a large part of the population is financing their consuming with loaned money. We have spent the last 30 years making the rich richer (and boy are they good at piling that money up), and the people who are supposed to have the purchasing power to drive demand have seen an ever shrinking part of the created wealth, and thus have to use loans. I am scared of what normalized interest rates will do.

room505 6y ago

I always share and discuss this link with friends and family https://www.financialsamurai.com/the-110th-rule-for-car-buying-everyone-must-follow/ https://www.financialsamurai.com/the-110th-rule-for-car-buyi... I bought a one year old used Mazda 3 from Hertz for 11k out the door. It had a few scratches and 40k miles. It still had that new car smell.