Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

CU System
Stretching car-loan terms may be risky says consultant
NEW YORK (2/14/08)--Some auto lenders are pushing longer-term car loans because they have less access to cheap-interest funds and can't cut monthly loan payments as deeply. That can be risky for the buyer and the lender, say several industry experts. About 82% of auto loans are for 60 months to 77.9 months. However, some go as long as 84 months, 96 months and nearly 102 months, according to data from Power Information Network, a unit of J.D. Power and Associates (USA TODAY Feb. 13). Toyota Motor Credit said last week it has been making 84-month (seven year)loans since August to ease buyers' monthly payments and to boost sales. GMAC offers 84-month loans, and Ford Motor Credit offers them in test marketing situations. But Argus Research auto analyst Kevin Tynan says easy buying and long loans can induce a bubble that will burst, much like the housing market did. Credit unions, seeing competition from auto dealers who offer lower month payments by stretching the number of those payments, may be tempted to follow their lead to stay competitive. However, there are other reasons to be cautious about extending loan payments, says Tynan:
* Longer loans mean the buyer plans to keep the vehicle a long time or is looking for a low monthly payment. That hurts future sales and financing opportunities. A decline in new car demand hurts the economy. * Vehicles depreciate fast. At a little over halfway into a 60-month loan, a vehicle might be worth little more than the loan balance. A longer loan means the buyer owes a lot more than the car is worth. * If the borrower decides to trade in, he still owes the balance on the original vehicle. The balance gets rolled into a new loan, making it almost impossible to have equity in a new vehicle.
Other Resources

RSS





print
News Now LiveWire
RT @cumagazine: Make a good impression during your #CUNAGAC Hill visits: 8 tips http://t.co/C4gtRbQG2s
20 minutes ago
Taking a walkthrough before #CUNAGAC starts this weekend. http://t.co/k9hktHjm9b
1 hour ago
There will be lots of social media action at 2015 #CUNAGAC that starts in D.C. this Sunday. http://t.co/vyP4XbtFbk
1 hour ago
.@AACUC1 is part of a group of credit union organizations to introduce a new mentor program for small credit unions http://t.co/2vFE45ZnEW
1 hour ago
Perk up after Daylight Saving switch Sunday with #WescomKindness from @TheCoffeeBean @Liz_Wescom
2 hours ago