Longer loans for lease buyers
As leasing becomes more expensive and dealers shift attention to sales, buyers are taking on longer loan terms to get the car they want at the price they can afford.
"It used to be 48- or 60-month loans," said Angela Butler, lease renewal coordinator with Naylor Chrysler Jeep in Ann Arbor. "Now there's a lot for 72-month loans."
With manufacturer incentives such as low interest rates, rebates and longer financing terms, drivers can continue to buy what they want.
"We can get a 60-month loans within a few dollars of a 36-month lease," said Russ Baltazar, general manager of Jim Bradley Pontiac Buick GMC in Ann Arbor. Interest rates run between 2.9 and 6.9 percent, he said.
Officials at University of Michigan Credit Union have also seen the length of auto loans grow, but it's been more of a gradual change over the past few years rather than a sudden lurch, said Jeff Schillag, vice president of marketing at the credit union. "We used to get a lot of 36- and 48-month requests. Now, 60- and 72-month loans are standard," he said.
Dealerships are seeing strong interest in long-term loans. "A lot of people I never expected are going with 72-month loans," Butler, of Naylor, said. "They see people losing their jobs, they see the rough economy, and they are now looking at their car as an investment. They want to pay for their car and keep driving it until the wheels fall off."
However, George Davis, general manager of Howard Cooper Imports, said his dealership isn't pushing longer auto loans. "This is just as bad as what was going on in the housing market two years ago," Davis said. "People got buried by their home mortgages. Now they'll get buried by a car loan that can go for 84 months."
That's too long, Davis said. "The car will spend half its life out of warranty, with high miles and worth less than what is owed. They'll be making two payments: The car loan and repair bills. It's a bad direction for domestic auto companies to go."
Rather, he said, car buyers should look at what they can afford with a shorter-term loan. "We try and keeps things under 48 months. We have some 60-month loans, but they are rare."
Some buyers are shying away from any long-term commitment to a car. "The number one thing buyers are telling us is that they are completely turned off by 72- or even 96-month financing terms," said John Sternal, spokesman for Leasetrader.com, which arranges secondary
auto lease trades.
"They see it as another mortgage, putting them in a long-term negative equity position. My grandfather drove his car for 25 years. But most people today want a new car three years down the road."
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This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your Car Lease, please visit www.leasetrader.com.
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com