High prices on cars and rising interest rates are bringing monthly payments to a record high.
The average financed amount for a new car reached $41,000, according to new numbers out this week from Edmunds for July, August and September.
That's up from about $38,000 at the same time last year. The average monthly payment is now above $700.
In general, more people are stretching out their loan terms. Edmunds said the average is 70 months. But some are opting for 84-month loans.
“If you traded in the car after owning it for three or four years, and you were negative equity, and you had to roll over that bad loan into that next vehicle payment, you really aren't the kind of person that should be taking out those very long, lengthy, long terms,” said Ivan Drury, director of insights with Edmunds.
He says if you're someone who drives a car until the wheels fall off, a long-term loan may work for you if the interest rate isn't too high.
But if your goal is to save money and stay out of the red, you could save thousands of dollars by agreeing to a shorter loan and larger monthly payment if that works for your finances.
A longer warranty is another option with a really long loan.
“You can negotiate those typically,” said Drury. “So, hey? The first price they throw out there. Maybe you, you know, I want to suggest something else, but it's definitely something that goes hand in hand because you don't want to have a vehicle that has a lot of repairs that are needed by the time that you finally pay it off.”
If you get into a long-term loan, you can also consider refinancing.
This could be a good deal, especially for someone who has repaired their credit.
