Should you take a longer loan to lower car payments?

TRANSCRIPT: Cars are selling the best they’ve sold in the last ten years, and that’s because the average age of a car in the United States is nearly twelve years old. A lot of them are aging out and we are having to replace them.

But there’s something a lot of us are doing when we go to buy those new wheels that’s causing a real problem. We are taking out really, really, really long car loans. In fact, roughly one in three car loans is six years or longer.

What’s the problem? Well, you may get a more affordable monthly payment but you’re always upside down in your car loan. Meaning you owe more on your car than what it’s worth for years and years and years. Which means any bad moment in your life you could end up with a repossession. You don’t want that. So, here’s the thing. If the payment on a car loan is too high in four years, that means you’re looking at too expensive of a car. So you might have to dial back to a used car or an older used car to get those payments more affordable, to keep you and your wallet safe.