Should you take out a 6 or 7 year auto loan?

Published: Jun. 10, 2022 at 1:33 PM CDT
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With new and used car prices near record highs, car buying can really be a case of sticker shock.

With the average new car price up to $46,000 in 2022, and used cars up 30% in the past year, many buyers are finding themselves priced out of the market.

The average monthly payment is up to $644 a month, according to Bankrate .Com.

As a result, dealers are pushing longer and longer loans: 6 or 7 years, up from 5 years a few years ago.

They usually sell it as an 84 month loan, because it is not as scary as saying 7 years.

But NerdWallet suggests you “say no to 72 and 84 month loans.”

The site says a seven- or eight-year loan can leave you underwater almost immediately, owing more money on your car than it’s worth.

The bigger problem with long loans: that car will need a new $800 set of tires, and probably other expensive repairs, when you are still paying for it each month.

Nerdwallet says instead of longer loans, you may want to consider buying a less luxurious cheaper new car.

Or try leasing, where you pay a much lower monthly rate

So think hard about still paying for that new car when it’s an old car.