Ben Eisen and Adrienne Roberts explain in The Wall Street Journal: "Approximately one-third of loans on new vehicles agreed upon in the first half of 2019 were for more than six years,compared with less than 10% a decade ago, according to Experian. With increases in vehicle prices outstripping income growth, the trend is seen as an indication many households struggle to finance their lifestyle."
"For many Americans, the availability of loans with longer terms has created an illusion of affordability. It has helped fuel car purchases that would have been out of reach with three-, five- or even six-year loans."
If you've ever tried to buy a vehicle with cash you likely experienced the hard sell to finance it instead. A buyer can feel like they are being held captive by the dealership if they want to make a cash purchase. That's because "dealers now make more money on the loans their customers take than on the cars they sell."
"The average loan stretches for roughly 69 months, a record. Some last much longer. In the first half of the year, 1.5% of auto loans for new vehicles had terms of 85 months or longer, according to Experian. Five years ago, these eight- and nine-year loans were practically nonexistent."
"As a result, a growing share of car buyers won’t pay off the debt before they trade in their cars for new ones, either because the car is in need of repairs or because they want a newer model. A third of new-car buyers who trade in their cars roll debt from old vehicles into their new loans, according to car-shopping site Edmunds."
And people wonder why so few Americans are financially prepared for retirement!
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