Up until recently, the longest term motor loan offered to consumers was a five year loan, but according to the Federal Reserve, the length of these motor loans is going up. Now, it is possible to get a seven year loan and soon eight will be made available as well. Although this may help lower monthly payments, experts are concerned that consumers will not realize how much extra they will have to pay in interest payments on these long term motor loans. The current housing crisis is forcing many to seek out more affordable motor loans and consumers are definitely attracted to longer term loans, despite the risks.
“Just a few years ago, some banks didn’t even offer a 72-month [six-year] loan,” said Jesse Toprak, chief economist with automotive research firm Edmunds.com. “It seems like a problem with no solution on the horizon.”
“The car dealer hopes that [the monthly payment] is all you’re looking at,” said Jean Ann Fox, director of financial services for the Consumer Federation of America,”That’s a car dealer trick, to get people to tell them what monthly payment they can make. You end up with a permanent payment in your family budget. … That’s money you don’t have for savings or anything else.”
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