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Clark Howard: Eight-year car loans

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Updated: 6/03/2013 9:01 am
JACKSONVILLE, Fla. -- As the price of the average car has risen above $30,000, the average monthly payment has actually dropped. That's because people are stretching out the length of their loan. "Now the norm is 60 to 72 months."

Steve Rayman says that business is great. Low interest rates have been driving car sales, but says a certain price point has been driving longer loans.

That has led to customers looking to extend their loans as far as 84 months just to get that monthly payment down. Some banks are even offering loans as long as 96 months or eight years to pay off a car!

Rayman says many customers come in looking for 84 month loans, but he's turned most of them away because it's not good business. Last year he says they only approved two 84 month loans.

How long of a car loan should you take out? Believe it or not 42 months or less. If you can't afford the payments of 42 months, it means you're buying more car than your wallet can afford.

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Watch Clark Howard weekday mornings on Action News This Morning on FOX30 beginning at 7 a.m.
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