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“The market is now comfortable in the 75-month terms.”
– Melinda Zabritski, senior product director of automotive finance at Experian Automotive
If you haven’t bought a car in a while, you may be surprised when the car dealer explains that you can buy more car than you thought possible. It’s not a scam and a wishful-thinking salesperson. The changing nature of both cars and car buyers has prompted auto lenders to extend loan terms, bringing monthly payments down.
Those of us of a certain age will remember that in the 1970s and 1980s, a car with 100,000 miles was destined for the junk yard, a hazard no one dared to drive. While the 100,000 mile end-life of a car has been a tough perception to shake, attitudes are changing rapidly.
Vigorous global competition among auto manufacturers has pushed automobile quality higher over the past 20 years. Today, the classified ads are full of Volvo’s, Honda and more with 200,000 miles and cab drivers brag of getting their Toyota Prius to 600,000 miles . . . with their original batteries, no less!
Not only are cars being designed for longer life, advances in science and engineering have helped created more durable materials. Carbon finishes on parts now approach the strength of diamonds, ensuring that each part remains intact far longer. Hyundai and Kia now include 100,000-mile/10-year warranties on all of their cars’ powertrains.
Increased longevity means that a car’s value as an asset has increased. It only follows then that banks feel more comfortable lending for a longer term. The average car on the road in 1977 was 5.5. By 2014, it was 11.4, a change that indicates not only improved car quality, but a shift in the American mindset.
Where once, buying or leasing a new car every two years indicated success and wealth, now it just seems foolish. Conspicuous consumption has been replaced by an ethic of value and sustainability, and car buyers are looking to stretch their dollars by keeping their cars for as long as they can. Banks, therefore, not only have more confidence in the long-term value of the car, but in the trustworthiness of the buyer. Millennials are far more willing to buy a used car than their parents were.
With longer loan terms, buyers are making bigger, better purchases. The car buyer with a $300 monthly budget may be able to buy new rather than used. He or she may also choose the certified pre-owned car rather than the questionable auto obtained through private sale. While the loan will last longer, the ability to buy a better car provides more value to the buyer. Down the line, as a trade-in or sale, the car will win the buyer more cash. The average subprime loan amount as of August 2016 was $29,359 for a new car and $16,120 for a used car.These figures are up 3% and 1.3% respectively from the same time last year.
If it’s time for a new or new, used car for you, make sure to check out our loans for all credit types, even bad credit! Those with bankruptcy still on their credit reports still can get a car loan for a used or even new car. It takes just three minutes to apply here for a new or used car loan at the lowest rates!
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