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Auto Loans Stretch into Dangerous Territory

“A formula for disaster”?

by on Jul.13, 2016

More shoppers are turning to 73-84 month loans to stretch their new car budget.

Though U.S. auto sales have slowed a bit in recent months, the American market seems all but certain to set a new record again this year, the third consecutive all-time high.

So why does that worry many industry experts? Because a growing number of car buyers are stretching their budgets with some of the longest loan terms ever offered, something one senior industry executive calls “a formula for disaster.”

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A new study by TransUnion shows that the average auto loan is now on the books for 67 months, up from just 62 months at the beginning of the decade. And the report reveals that the number of loans running anywhere from 73 to 84 months has more than doubled since 2010.


More U.S. Auto Buyers Falling Behind on Payments

But that’s “not yet a cause for concern.”

by on Feb.09, 2016

Car dealers have been seeing record numbers of shoppers - but loan delinquencies are rising, too.

More expensive loans aren’t the only reason for automakers to worry, industry analysts are warning. There are signs that more consumers are having trouble handling the loans they’ve already taken out.

With a record number of Americans buying new vehicles last year, lenders logged a record amount of debt on their books. And a growing number of those buyers are falling behind on payments, according to Experian Automotive. While 30-day delinquencies are actually down, the number of motorists two months behind on payments grew sharply.

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“Given that we’ve seen an increase in loans to subprime and deep-subprime consumers, it’s natural to see a slight uptick,” explained Melinda Zabritski, senior director of automotive finance for Experian. “Although not yet a cause for concern, the industry should keep an eye on this metric to see how it trends in the quarters to come.”


Motorists Put Priority on Car Payments Over Credit Card, Mortgage Bills

“A reversal in payment patterns.”

by on Mar.29, 2012

Consumers may be slipping on the credit card and mortgage bills but a new study finds they're trying to keep up on the car loan.

The weak economy and high unemployment have stretched the budget to the breaking point for many Americans.  Struggling to decide which bills they can pay, a new study finds a surprising number of people will go delinquent on mortgage and credit card bills before lapsing on their monthly car loans.

Traditionally, American consumers have put a high priority on paying their mortgage on time, no surprise since losing one’s home is a life-changing experience.  Credit card debt, with traditionally high interest rates, have followed close behind.  But at a time when people may need a car more than ever simply to find a job, there has been a “reversal in payment patterns,” according to TransUnion Vice President Ezra Becker.

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“With unemployment remaining high and real estate values remaining stagnant or further depreciating, consumers continued to pay their credit cards ahead of their mortgages,” said Becker, who is in charge of research and consulting at TransUnion’s financial services business unit.  “However, the importance of their auto loans appears to have trumped even the value they place on their credit cards.”