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The Rise of 84-Month Car Loans: Why Buyers Are Trapped
The Rise of 84-Month Car Loans: Why Buyers Are Trapped

Miami Herald

time6 days ago

  • Automotive
  • Miami Herald

The Rise of 84-Month Car Loans: Why Buyers Are Trapped

Regardless of whether you've nervously scrolled through endless listings on dealer websites or wasted hours of your life configuring your dream cars online, it hurts to know that new cars are expensive. According to analysts from Kelley Blue Book and Cox Automotive, dealers are doing the most they can to keep car prices steady; however, the average new car in the U.S. still costs a whopping $48,799 in May 2025, a 2.1% increase from the same month in 2024. Although data shows that tariffs have influenced some buyers in the U.S. to defer or delay their buying decisions, other buyers must finance their cars, which keeps a disturbing trend alive among new car buyers. According to new data released by car buying authority Edmunds, Americans' auto loans are reaching a point where Dave Ramsay and Caleb Hammer would declare a personal finance armageddon. While automakers and dealer groups would advertise their single-digit promotional financing rates as terms that extend over 60 months (5 years) or 72 months (6 years), buyers are stretching their payment plans for much longer. Edmunds reports that in Q2 2025, more buyers than ever are taking out loans over the course of 84 months (7 years), making up about 22.4% of new-vehicle financing in the quarter, up from 20.4% in Q1 2025 and 17.6% during the same period last year. Though buyers are willing to stretch and spread out their loan terms for a lower monthly payment, they aren't being spared from paying out the wazoo every month. According to Edmunds, over 19.3% of new car buyers had monthly payments that exceeded $1,000 in Q2 2025, a notable increase from the 17.7% in the previous quarter. As more buyers opt for extended loan terms, Edmunds' consumer insights analyst Joseph Yoon warns that this could have later consequences, especially as the risks and tribulations of car ownership, such as upkeep costs and depreciation, kick in. "While extended loan terms may make a monthly payment more palatable, consumers need to keep in mind the risks associated with a loan extended that far into the future, including increased costs for upkeep down the line and the risk of being underwater on the loan if the car is traded in before it's paid off," Yoon said. "If payments on a more standard 60- or 72-month loan don't fit your budget, you might consider leasing. While you won't be building equity in your vehicle the way you do with a purchase, leases afford time to get your finances in better shape with lower monthly payments in the meantime." Although ads on TV during select promotional periods, like certain federal holidays, show that your local [insert automotive brand here] dealer is offering 0% APR loans, or a number close to it (such as 0.9%) on a specific model, these kinds of rates are far out of reach for the average new car buyer. Edmunds says that the average buyer financed their cars at an annual percentage rate (APR) of 7.2%. However, this doesn't mean that 0% finance deals don't exist; in fact, they accounted for 0.9% of new-vehicle loans in Q2 2025. This was the lowest share Edmunds recorded since 2004, down from 1% in Q1 2025 and 2.9% in Q2 2024. However, while it is commonly known that a sizable down payment is required to achieve manageable monthly payments, in addition to accepting longer loan terms, Edmunds found that buyers are putting less money down on their new car loans than ever before. According to their data, the average down payment that buyers put down on their new-car loans was $6,433 in Q2 2025, which is down from $6,511 during the previous quarter and $6,579 during the same time last year. At the same time, Edmunds found that new car buyers are financing increasingly expensive vehicles. They found that the average amount financed for new cars climbed to an all-time high of $42,388 in Q2 2025, up from $41,473 during the last quarter and $40,873 during the same time last year. In a statement, Ivan Drury, Edmunds' director of insights, noted that while it would be easy to assume and point fingers at the Trump administration's tariffs, car prices remain steady at a level that car buyers still can't afford. "It's clear that buyers are pulling the few levers they can control to manage affordability, whether that's by taking on longer loans, financing more, or putting less money down - even if some of those decisions increase their total costs," Drury said. "Consumers are continuously stretching to afford new vehicles in this market, and while tariffs haven't directly driven these Q2 numbers, they're certainly not going to make things any easier for shoppers moving forward." We are seeing automakers react to the reality of extended loan payments, too. In fact, the Stellantis-backed Ram Trucks began to offer a best-in-class 10-year/100,000-mile powertrain warranty, which gives Ford and Chevy something to think about. However, in its press release, Ram acknowledges that the warranty comes as "more buyers opt for extended loan terms." "Everything is more expensive, and trucks are certainly no exception. Truck buyers are financing purchases for longer periods of time, with nearly 80% of new truck loans exceeding five years," Ram Trucks CEO Tim Kuniskis said in a statement. It is one thing for automakers to recognize this reality, but it is another to enable it. This data comes at the same time when auto loan delinquency is at its highest, as 1.4% of auto borrowers were at least 60 days behind on their auto loan payments during the first quarter of 2025, per TransUnion. Copyright 2025 The Arena Group, Inc. All Rights Reserved.

The Worst Financial Advice on Reddit and What To Do Instead
The Worst Financial Advice on Reddit and What To Do Instead

Yahoo

time30-05-2025

  • Business
  • Yahoo

The Worst Financial Advice on Reddit and What To Do Instead

Reddit is a goldmine for personal finance stories, but it's also a place where bad advice gets shared, and sometimes followed. Threads on r/DaveRamsey and r/CalebHammer asked users to share the worst financial advice they've ever received and the responses were eye-opening. Read Next: For You: Here are some of the most damaging advice shared in that thread and what to do instead of following that advice. One of the most common pieces of bad advice is to take out a car loan just to build credit. 'For me, it had to be to finance a car because I could build my credit. However, I did not do that but instead bought a car with $160k miles for $4700 and pocketed about $1500 after registration was done [sic],' one Redditor by the username u/[deleted] wrote. What to Do Instead: You don't need to go into debt to build credit. A secured credit card, used responsibly, can help you establish a credit history without the burden of a car loan. Becoming an authorized user on a family member's credit card can also help. Check Out: Another Reddit user reported being told that saving money isn't important when they're young. '[I was told that] saving doesn't matter when you're young, because the money you'll make when you're in your peak earning years will make the early savings irrelevant. Lived like that through my twenties. Pretty much spent everything I made. Now in my thirties, and not really making what I thought I would be at this time in my life,' the user u/WORLDBENDER wrote. What to Do Instead: Enjoying life while you're young doesn't mean you should spend all your money and not prepare for the future. Take advantage of compound interest and start saving and investing money every single month to build a solid financial foundation. Most students are encouraged not to take out too many student loans, but one was told to take out as much money as they could. '[I was told m]ax out your federal student loans. It's the cheapest money you'll ever borrow,' user u/napashadow explained. What to Do Instead: Only borrow what you absolutely need for tuition and essential expenses. And before taking out student loans, make sure you've looked into scholarships, grants and work-study programs. You can also consider going to a community college for the first two years to save money. A user said the worst financial advice they ever received was to take out a loan to buy cryptocurrency. '[I was told t]o get a second mortgage on my house to buy dogecoin,' user u/gumercindo1959 wrote. What to Do Instead: Using debt to chase quick gains can easily backfire and leave you underwater if the market crashes. Instead, only invest money you can afford to lose, and build wealth by diversifying your portfolio with less volatile options like index funds. Another person said they were advised to use their credit card as much as possible to earn rewards. 'The more you spend with your credit card, the more money you make,' Reddit user u/[deleted] wrote. What to Do Instead: Credit card rewards are great, but they're definitely not a reason to spend more than you normally would. If you're racking up debt just to earn rewards, you'll ruin your credit score if you fail to pay it back. The best way to use credit cards is to use them for stuff you were already planning to buy and pay your balance off in full and on time each month. Another user shared the bad advice they got about stretching out payments just because the option was available. '[I was told t]hey're letting you pay it over 12 months, why wouldn't you take that deal?' u/Honest_Grapefruit259 wrote. What to Do Instead: Just because you have the option to pay something off over time doesn't mean you should. 'Buy now, pay later' plans can make it easy to overspend and lose track of what you actually owe. Plus, those monthly payments add up fast and missing one could come with fees or hurt your credit. If you can't afford to pay for something upfront, you may want to reconsider the purchase altogether. You shouldn't take financial advice from just anybody, especially when it comes to your finances. Just because a friend, family member or random Reddit user recommended something doesn't mean it's right for you. If you need help making a financial decision, reach out to a certified financial advisor who can give you advice based on your specific situation. More From GOBankingRates Mark Cuban Tells Americans To Stock Up on Consumables as Trump's Tariffs Hit -- Here's What To Buy The 5 Car Brands Named the Least Reliable of 2025 This article originally appeared on The Worst Financial Advice on Reddit and What To Do Instead Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data

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