Would you consider taking eight years to pay off your car loan if that meant a low monthly payment?
One car shopper who contacted the Watchdog almost did.
Last week, the woman went with her husband to an area dealership to purchase a used 2012 Toyota Sienna. They had financing set up through their credit union, but the car cost too much.
Then the car salesman suggested something that sounded good - a 96-month loan with a 2.5 percent interest rate. That brought the monthly payment down to a budget-friendly $313 a month.
They were thrilled.
The couple later found out they hadn't been approved for the 96-month loan, and wound up financing the vehicle another way. But the situation raises an expensive question: Is that long of a loan ever a good idea even with a low rate?
With the rising cost of automobiles, the eight-year loan is an option for some, though it relatively unusual.
The average sale price of a vehicle in the U.S. topped $31,000 last month. In March, The Los Angeles Times reported that 32 percent of car buyers took out loans of 72 months or more. Not only are cars getting more expensive, but drivers are holding onto them for longer (an average of 11 years, according to some auto research firms).
Thomas King, senior director at market research firm J.D. Power and Associates, which focuses on the auto industry, said 96-month car loans remain rare. Loans that are 84 months or longer account for about 4 percent of car loans.
Long-term loans do allow drivers to buy a pricier car while maintaining affordable monthly payments.
"It does mean it's going to take the consumer a long time to reach equity," King said. "But if a consumer plans to keep their car for a long time, it may not be as much of a concern."
Franz Schneiderman, a spokesman for consumer advocacy group The Maryland Consumer Rights Coalition, said car dealers are being squeezed by manufacturers' markups on vehicles.
"Higher interest on longer term loans is part and parcel to how dealers are using financing to make more of their profit off of financing," Schneiderman said.
He encourages car buyers to fight the urge to tell the dealership what they're hoping to pay monthly.
"If you give them a number," Schneiderman said, "they'll set up a deal."
Even if it'll cost you more in interest the long run.
Peter Kitzmiller, the president of the Maryland Car Dealers Association, said longer car loans became more popular after the economic downturn had customers wanting low monthly payments.
Cars made today also last longer, so it's less risky taking out a lengthy loan and then having your car break down while you're still paying it off.
"Not even 10 years ago, 48 months was the norm," he said.
Kitzmiller said he'd never heard of a 96-month loan on a used car. While he acknowledged car dealers and buyers have more financing options now, consumers should generally set up financing with their credit union or bank before going to the dealership. Usually, they'll get a better rate.
"People make it more complicated than it needs to be," Kitzmiller said.
Original headline: Is a 96-month car loan ever a good idea?
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