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71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 14
Highway 1THE LATEST ON CARS CULTURE AND DRIVING
Comments 41 Email Share TweetTweet 32 5
A record number of car buyers are taking out loans of six eight or even 10 years in an erawhen cars last longer and have better warranties
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Stretched car loans gain traction with buyers
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Th e sta n da r d len g th of ca r loa n s mdash on ce fou r y ea r s th en fiv e mdash h a s been cr eepin g u p for som e t im e
A u tom a ker s h a v e m a r keted th e lon g loa n s a g g r essiv ely con v in cin g som e bu y er s to m ov e u p to pr icier
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Ch ev r olet dea ler sh ip in Colu m bu s Oh io la st m on th (Ty Wr ig h t Bloom ber g Ju ly 1 2 2 01 3 )
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71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 24
By Jerry Hirsch Los Angeles Times
July 11 2013 734 pm
Scott Greenberg could have handled a bigger car payment
But with a baby on the way and the dealership offering a
rock-bottom interest rate Greenberg stretched the loan to
72 months mdash about as long as the average American keeps a
new car At 264 interest the long term cut about $100
from his monthly payment on the Volkswagen Touareg SUV
I will be putting that savings into her college fund
Greenberg said of the daughter hes expecting
The Santa Monica technology consultant is among a record
number of car buyers taking out loans of six eight or even 10
years Loans of six years or longer account for 30 of all
financing deals so far this year including leases according to
research firm JD Power and Associates Thats up from 23
five years ago
The standard length of car loans mdash once four years then five
mdash has been creeping up for some time Extended terms are
gaining traction in an era when cars last longer and have
better warranties Automakers have marketed the long loans
aggressively persuading some buyers to move up to pricier
models they couldnt otherwise afford The median-priced
new car now costs $28555 according to Kelley Blue Book
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 Corps North
American division
Its the kind of trend that normally makes personal finance
gurus sound the alarm And long loans can still get consumers
in trouble particularly those with tarnished credit who cant
qualify for the best deals But at historically low rates longer
loans can make sense for savvy buyers with good credit and
the intent to drive their vehicles for many years Such
consumers are slashing their car payments and diverting the
money to higher-interest debt investments or other
priorities
Bradley Gallant of Plymouth Mich plans to divert extra
money each month to investments He borrowed for 72
months at 189 from Wells Fargo when he bought a Honda
Accord in March The finance executive at an energy
company slashed about $130 from his monthly payment
compared with the traditional four-year loan Hell shell out only about $370 more in interest over
the life of the loan
I am confident I could invest the cash in alternative investments and earn a much higher return
Gallant said
Although interest rates on home mortgages have started to rise analysts believe the low rates on
auto loans should stick around for some time Automakers are often more concerned with selling
cars than profiting from financing
Low finance rates are what is keeping America spending said Jessica Caldwell an analyst at auto
information company Edmundscom
Automakers make more in interest on longer loans with little additional risk Car loan defaults
typically take place within six months after purchase when the car still has much of its value Lentz
said
Consumer finance experts warn that longer loans work only because of the rock-bottom interest
rates mdash and even then they should be approached with caution
Its treating a car like a home mortgage said Casey Bond managing editor of
GoBankingRatescom a personal finance information company You really have to do the math
Personally I dont like paying extra money for the privilege of being in debt
Even at low rates its not smart to use debt for purchases that dont fit your budget she said
My suggestion would be to buy a cheaper car Bond said
Car shoppers pursuing a long loan need to have stellar credit and financial reserves said Christopher
Kukla senior vice president of the Center for Responsible Lending
Most Viewed Latest News
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Senate prepares forfilibuster showdown
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Nury Martinez andchildhood abuse
Ads by Google
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Tesla rev eals battery swap plan forits high-end electric cars
GM brands make big jump in JDPower initial quality rankings
Chev rolet announces 0-60 time for201 4 Corv ette Stingray
Ads by Google
Get a Secured Loan Using
Your Car Title as Collateral$2600 -$50k in 1 HR Keepyour car
www1800cartitleloancom
Bad Credit Auto Financing
(Recommended Site) 100Online App $7K-$25K CarLoanmdashApply at Carcomtrade
wwwCarcom
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Jenny McCarthys hiring as View co-host ismatter of contention 07162013 530 am
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500 am
Snowden digging himself in deeper with newthreats revelations 07162013 500 am
Zimmerman verdict protesters attack TV
71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 34
Comments 41 Email Share TweetTweet 32 5
FROM AROUND THE WEB
laquo Prev ious Story More Automobiles Motorcy cles Car NewsReviews and Photos - Highway 1 - latimescom
Next Story raquo
2014 Mazda3 hasthe goods but willconsumers knowit
Tesla Motors stockjoining Nasdaq 100index
Theyll need cash for a replacement vehicle if their car gets totaled because longer loans and smaller
payments leave drivers vulnerable to owing more than the insurance company will pay on a claim
Kukla said
Otherwise they can quickly find themselves in the financial quagmire that caught Gilberto Chacin a
US Army sergeant at Fort Irwin the sprawling base in the Mojave Desert
Chacin bought a 2013 Mazda CX-5 after an aging Dodge Caravan became unreliable He had to take
out an 84-month loan to get the monthly payment down to a manageable $469 Thats because he
still owed $5000 on the old van and had to wrap that debt into the new 61 loan
I never intended to pay for a car for 84 months We understand that it is a horrible financial
decision Chacin said Sometimes life throws curveballs at you
Long car loans make the decision of what car to buy that much more important Cars with a track
record of strong reliability and resale value are less likely to leave buyers in a lurch
Consider the buyer of a $26000 Chrysler 200 which has one of the worst resale values among
family sedans That cars value would probably plummet to about $10600 after just three years
according to ALG an auto research firm that analyzes resale values The buyer would still owe at
least $1000 more than that on a six-year loan at 2 interest assuming a $4000 down payment
The same scenario would enable the buyer of a similarly priced Honda Accord mdash with among the
best resale values mdash to sell the car for $3000 more than what was owed Even at 6 interest the
Accord buyer would come out about $1500 ahead after three years
Another big problem with long loans experts say is that only a small percentage of buyers qualify
for the lowest interest rates which lenders aggressively market to all shoppers
Most people with subprime credit are happy someone said yes Kukla said and they buy almost
solely on monthly payment
Thats what happened to Lisa Gregg an administrative assistant in Nashville After her car was
totaled in a wreck Gregg bought a new Kia Rio financing the entire $17322 purchase price Because
of her credit problem the dealer gave her a six-year loan with a 1699 interest rate
Gregg will pay more than $10000 in interest over the life of the loan mdash almost enough to buy
another small economy car Shes now looking to refinance the car at a lower rate
Like most people I looked at the monthly payment rather the total and the longer term had a lower
payment Gregg said It is my own fault but I needed a car
jerryhirschlatimescom
Copy r ig h t copy 2 01 3 Los A n g eles Tim es
61
Recommended by
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Same Day Title LoansGet $2600 to $50000 Fast Cash Apply Online amp Get a Quote in Mins
wwwINeedCashNownetCash-in-1HR
325 APR Fixed HARP RefiNo (ZERO) Closing Cost Refinancing Low APR Mortgage Available
CashCallMortgagecom
Ads by Google
Used Cars New Cars
Video
Southern California Carsfor Sale
Headline Fiery tanker truck crashellipLos Angeles Times Jul 15 2013
Your selected content will begin in 9 seconds
reporter storm Wal-Mart 07162013 500 am
Used CarsDealer and private-party ads
Make
Acura
Model
Select a Model
Price Range
$0 to No Max
Search within
30 miles of ZIP
KBB Used Car Values | Used Car Specials
Like 29
71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 24
By Jerry Hirsch Los Angeles Times
July 11 2013 734 pm
Scott Greenberg could have handled a bigger car payment
But with a baby on the way and the dealership offering a
rock-bottom interest rate Greenberg stretched the loan to
72 months mdash about as long as the average American keeps a
new car At 264 interest the long term cut about $100
from his monthly payment on the Volkswagen Touareg SUV
I will be putting that savings into her college fund
Greenberg said of the daughter hes expecting
The Santa Monica technology consultant is among a record
number of car buyers taking out loans of six eight or even 10
years Loans of six years or longer account for 30 of all
financing deals so far this year including leases according to
research firm JD Power and Associates Thats up from 23
five years ago
The standard length of car loans mdash once four years then five
mdash has been creeping up for some time Extended terms are
gaining traction in an era when cars last longer and have
better warranties Automakers have marketed the long loans
aggressively persuading some buyers to move up to pricier
models they couldnt otherwise afford The median-priced
new car now costs $28555 according to Kelley Blue Book
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 Corps North
American division
Its the kind of trend that normally makes personal finance
gurus sound the alarm And long loans can still get consumers
in trouble particularly those with tarnished credit who cant
qualify for the best deals But at historically low rates longer
loans can make sense for savvy buyers with good credit and
the intent to drive their vehicles for many years Such
consumers are slashing their car payments and diverting the
money to higher-interest debt investments or other
priorities
Bradley Gallant of Plymouth Mich plans to divert extra
money each month to investments He borrowed for 72
months at 189 from Wells Fargo when he bought a Honda
Accord in March The finance executive at an energy
company slashed about $130 from his monthly payment
compared with the traditional four-year loan Hell shell out only about $370 more in interest over
the life of the loan
I am confident I could invest the cash in alternative investments and earn a much higher return
Gallant said
Although interest rates on home mortgages have started to rise analysts believe the low rates on
auto loans should stick around for some time Automakers are often more concerned with selling
cars than profiting from financing
Low finance rates are what is keeping America spending said Jessica Caldwell an analyst at auto
information company Edmundscom
Automakers make more in interest on longer loans with little additional risk Car loan defaults
typically take place within six months after purchase when the car still has much of its value Lentz
said
Consumer finance experts warn that longer loans work only because of the rock-bottom interest
rates mdash and even then they should be approached with caution
Its treating a car like a home mortgage said Casey Bond managing editor of
GoBankingRatescom a personal finance information company You really have to do the math
Personally I dont like paying extra money for the privilege of being in debt
Even at low rates its not smart to use debt for purchases that dont fit your budget she said
My suggestion would be to buy a cheaper car Bond said
Car shoppers pursuing a long loan need to have stellar credit and financial reserves said Christopher
Kukla senior vice president of the Center for Responsible Lending
Most Viewed Latest News
Top ten futurecollector cars
Officials crack down onTray von protesters
Senate prepares forfilibuster showdown
Group calls for FTCinvestigation of Jay -Zapp
Nury Martinez andchildhood abuse
Ads by Google
Photos The 1 0 worst cars sold inAmerica
Tesla rev eals battery swap plan forits high-end electric cars
GM brands make big jump in JDPower initial quality rankings
Chev rolet announces 0-60 time for201 4 Corv ette Stingray
Ads by Google
Get a Secured Loan Using
Your Car Title as Collateral$2600 -$50k in 1 HR Keepyour car
www1800cartitleloancom
Bad Credit Auto Financing
(Recommended Site) 100Online App $7K-$25K CarLoanmdashApply at Carcomtrade
wwwCarcom
Photos of the Day More raquo
Nick Youngs Lakers contract is for two yearswith player option 07162013 530 am
Jenny McCarthys hiring as View co-host ismatter of contention 07162013 530 am
Misperceptions fueled the TrayvonMartinGeorge Zimmerman tragedy 07162013
500 am
Snowden digging himself in deeper with newthreats revelations 07162013 500 am
Zimmerman verdict protesters attack TV
71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 34
Comments 41 Email Share TweetTweet 32 5
FROM AROUND THE WEB
laquo Prev ious Story More Automobiles Motorcy cles Car NewsReviews and Photos - Highway 1 - latimescom
Next Story raquo
2014 Mazda3 hasthe goods but willconsumers knowit
Tesla Motors stockjoining Nasdaq 100index
Theyll need cash for a replacement vehicle if their car gets totaled because longer loans and smaller
payments leave drivers vulnerable to owing more than the insurance company will pay on a claim
Kukla said
Otherwise they can quickly find themselves in the financial quagmire that caught Gilberto Chacin a
US Army sergeant at Fort Irwin the sprawling base in the Mojave Desert
Chacin bought a 2013 Mazda CX-5 after an aging Dodge Caravan became unreliable He had to take
out an 84-month loan to get the monthly payment down to a manageable $469 Thats because he
still owed $5000 on the old van and had to wrap that debt into the new 61 loan
I never intended to pay for a car for 84 months We understand that it is a horrible financial
decision Chacin said Sometimes life throws curveballs at you
Long car loans make the decision of what car to buy that much more important Cars with a track
record of strong reliability and resale value are less likely to leave buyers in a lurch
Consider the buyer of a $26000 Chrysler 200 which has one of the worst resale values among
family sedans That cars value would probably plummet to about $10600 after just three years
according to ALG an auto research firm that analyzes resale values The buyer would still owe at
least $1000 more than that on a six-year loan at 2 interest assuming a $4000 down payment
The same scenario would enable the buyer of a similarly priced Honda Accord mdash with among the
best resale values mdash to sell the car for $3000 more than what was owed Even at 6 interest the
Accord buyer would come out about $1500 ahead after three years
Another big problem with long loans experts say is that only a small percentage of buyers qualify
for the lowest interest rates which lenders aggressively market to all shoppers
Most people with subprime credit are happy someone said yes Kukla said and they buy almost
solely on monthly payment
Thats what happened to Lisa Gregg an administrative assistant in Nashville After her car was
totaled in a wreck Gregg bought a new Kia Rio financing the entire $17322 purchase price Because
of her credit problem the dealer gave her a six-year loan with a 1699 interest rate
Gregg will pay more than $10000 in interest over the life of the loan mdash almost enough to buy
another small economy car Shes now looking to refinance the car at a lower rate
Like most people I looked at the monthly payment rather the total and the longer term had a lower
payment Gregg said It is my own fault but I needed a car
jerryhirschlatimescom
Copy r ig h t copy 2 01 3 Los A n g eles Tim es
61
Recommended by
How LA is Changing Public Transportation |
Ame ricas Natural Gas Alliance
The 12 Worst Supermarkets in America | The Fiscal
Time s
Amazing Hi-Def Photos Black Sea Blooming |
re dOrbit
Buying vs Renting a House The Advantages ofEach | YouTube
Flash Storage - Understanding the MostDisruptive Tech on the Market | Ne tworkWorld
MORE FROM THE TIMES
Two and a Half Men swaps Angus T Jones withlesbian character
Claire Danes on Homeland acting and hermommy mashup
Florida staffer fired over evidence inZimmerman case
Teslas Elon Musk says Hyperloop rail design iscoming soon
IPhone sales shortfall could leave Verizonowing Apple $14 billion
Same Day Title LoansGet $2600 to $50000 Fast Cash Apply Online amp Get a Quote in Mins
wwwINeedCashNownetCash-in-1HR
325 APR Fixed HARP RefiNo (ZERO) Closing Cost Refinancing Low APR Mortgage Available
CashCallMortgagecom
Ads by Google
Used Cars New Cars
Video
Southern California Carsfor Sale
Headline Fiery tanker truck crashellipLos Angeles Times Jul 15 2013
Your selected content will begin in 9 seconds
reporter storm Wal-Mart 07162013 500 am
Used CarsDealer and private-party ads
Make
Acura
Model
Select a Model
Price Range
$0 to No Max
Search within
30 miles of ZIP
KBB Used Car Values | Used Car Specials
Like 29
71613 Stretched car loans gain traction with buyers - latimescom
wwwlatimescombusinessautosla-fi-hy-autos-car-mortgage-2013071204878574fullstory 34
Comments 41 Email Share TweetTweet 32 5
FROM AROUND THE WEB
laquo Prev ious Story More Automobiles Motorcy cles Car NewsReviews and Photos - Highway 1 - latimescom
Next Story raquo
2014 Mazda3 hasthe goods but willconsumers knowit
Tesla Motors stockjoining Nasdaq 100index
Theyll need cash for a replacement vehicle if their car gets totaled because longer loans and smaller
payments leave drivers vulnerable to owing more than the insurance company will pay on a claim
Kukla said
Otherwise they can quickly find themselves in the financial quagmire that caught Gilberto Chacin a
US Army sergeant at Fort Irwin the sprawling base in the Mojave Desert
Chacin bought a 2013 Mazda CX-5 after an aging Dodge Caravan became unreliable He had to take
out an 84-month loan to get the monthly payment down to a manageable $469 Thats because he
still owed $5000 on the old van and had to wrap that debt into the new 61 loan
I never intended to pay for a car for 84 months We understand that it is a horrible financial
decision Chacin said Sometimes life throws curveballs at you
Long car loans make the decision of what car to buy that much more important Cars with a track
record of strong reliability and resale value are less likely to leave buyers in a lurch
Consider the buyer of a $26000 Chrysler 200 which has one of the worst resale values among
family sedans That cars value would probably plummet to about $10600 after just three years
according to ALG an auto research firm that analyzes resale values The buyer would still owe at
least $1000 more than that on a six-year loan at 2 interest assuming a $4000 down payment
The same scenario would enable the buyer of a similarly priced Honda Accord mdash with among the
best resale values mdash to sell the car for $3000 more than what was owed Even at 6 interest the
Accord buyer would come out about $1500 ahead after three years
Another big problem with long loans experts say is that only a small percentage of buyers qualify
for the lowest interest rates which lenders aggressively market to all shoppers
Most people with subprime credit are happy someone said yes Kukla said and they buy almost
solely on monthly payment
Thats what happened to Lisa Gregg an administrative assistant in Nashville After her car was
totaled in a wreck Gregg bought a new Kia Rio financing the entire $17322 purchase price Because
of her credit problem the dealer gave her a six-year loan with a 1699 interest rate
Gregg will pay more than $10000 in interest over the life of the loan mdash almost enough to buy
another small economy car Shes now looking to refinance the car at a lower rate
Like most people I looked at the monthly payment rather the total and the longer term had a lower
payment Gregg said It is my own fault but I needed a car
jerryhirschlatimescom
Copy r ig h t copy 2 01 3 Los A n g eles Tim es
61
Recommended by
How LA is Changing Public Transportation |
Ame ricas Natural Gas Alliance
The 12 Worst Supermarkets in America | The Fiscal
Time s
Amazing Hi-Def Photos Black Sea Blooming |
re dOrbit
Buying vs Renting a House The Advantages ofEach | YouTube
Flash Storage - Understanding the MostDisruptive Tech on the Market | Ne tworkWorld
MORE FROM THE TIMES
Two and a Half Men swaps Angus T Jones withlesbian character
Claire Danes on Homeland acting and hermommy mashup
Florida staffer fired over evidence inZimmerman case
Teslas Elon Musk says Hyperloop rail design iscoming soon
IPhone sales shortfall could leave Verizonowing Apple $14 billion
Same Day Title LoansGet $2600 to $50000 Fast Cash Apply Online amp Get a Quote in Mins
wwwINeedCashNownetCash-in-1HR
325 APR Fixed HARP RefiNo (ZERO) Closing Cost Refinancing Low APR Mortgage Available
CashCallMortgagecom
Ads by Google
Used Cars New Cars
Video
Southern California Carsfor Sale
Headline Fiery tanker truck crashellipLos Angeles Times Jul 15 2013
Your selected content will begin in 9 seconds
reporter storm Wal-Mart 07162013 500 am
Used CarsDealer and private-party ads
Make
Acura
Model
Select a Model
Price Range
$0 to No Max
Search within
30 miles of ZIP
KBB Used Car Values | Used Car Specials
Like 29
