In an effort to make monthly payments more affordable, some car loan terms have increased to a whopping 8 years. The average price of a new car is $13,200, but financial experts say that stretching out payments to make this more affordable may be a bad idea. Three years used to be a standard loan, but because cars today have a longer lifespan, many consumers are taking longer loans to avoid higher monthly payments. This means higher interest rates and a longer period of owing more than the car is worth. Many financial experts recommend the 20-4-10 rule, which states that you should have a 20% down payment on a car, a loan of no more than four years, and a payment no more than 10% of your income. However, last year, 89% of auto loans exceeded that 4 year limit, and 16% went longer than 6 years.
Read the full article here: