I knew people were taking on auto loans with terms as long as 72 or even 84 months, but I did not know 96 month loans were even a thing. Nor did I know just how many people were signing up for them. The Financial Times reports that there has been a strong uptick in new car buyers taking on 96 month loans. Eight years!
There’s a lot to unpack in the Financial Times piece. We’re at record-setting outstanding loan amounts ($1.2 trillion). People are paying record prices for new cars ($27,430). And 6.3 million people are 90 days or more behind on their auto loan payment, another record!
Lenders in America’s $1.2tn car-loan market are extending terms for as long as eight years, meaning they face a greater risk of defaults and meager recovery values.
If I could find a 96-month loan at 0.9% or even 1.9% I would take it in a heartbeat, that’s just free money. But I’m guessing the majority of these 96-month loans are going out to less than savvy buyers getting in vehicles they have no business even thinking about buying. A great reminder to negotiate the vehicles sale price and not the payment!