INDIANAPOLIS — More Americans are stretching out their auto loan terms just to afford a car, according to a new survey.
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Nearly half of Americans now take out auto loans longer than 72 months, a trend driven by rising vehicle prices and higher monthly payments, according to LendingTree.
Ashley Buster is trying to avoid that situation altogether. She received her car as a gift in 2018 and plans to keep it for as long as possible.
“There’s just other expenses that I’d rather save for. I don’t need a car. I’m going to try to run it until it’s not going to run anymore,” Buster said.
For many drivers, rising costs are making that choice harder. Monthly car payments have increased sharply in recent years.
“I would say when I first made a car payment, it was like $450. Now I’m more in the $600 range, so I would say it’s way more expensive than it used to be,” said Natalia Corbin, an Indianapolis resident.
LendingTree’s survey also found that some borrowers are facing especially steep payments.
“And we’re even seeing people with 1,000 plus car payments, and that is a really big number when you consider how tight most American's budgets are and how little expendable income a lot of people have,” said Matt Schulz, LendingTree’s chief consumer finance analyst. “So there’s no question that people are struggling to afford the high price of cars, whether it’s used or new.”
Schulz said Gen X and millennial borrowers are carrying the largest auto loan balances. While longer loan terms can lower monthly payments, he warned they often cost more over time.
“Longer loan terms give you lower monthly payments usually, but you end up paying for it in the long run,” Schulz said.
For those shopping for a vehicle, Schulz recommends comparing lenders, considering lower-cost options and getting pre-approved before heading to a dealership.
“Chances are the rates they offer aren’t going to be as good from a bank or credit union if you take the time to shop around,” he said.
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