Cars and trucks are more expensive than ever before. In order to boost sales and help consumers afford new vehicles, automakers are offering long and long terms for auto loans. This past week, Bloomberg reportsFCA’s Ram Trucks division current offers the longest loans. Some currently stretch to 73 months. Jeep, Fiat and Chevy aren’t far behind. Even more noteworthy is that we’re likely soon see lenders moving from 73-month to 84-month loans. That’s seven years worth of interest.
More than two-thirds of US auto sales come from light trucks like the Ford F-150, Chevy Silverado and Ram 1500. The average transaction price of a new vehicle is well over $30,000. It’s not difficult to spec out a heavily-optioned truck up to $60,000. Vehicles depreciate from the moment they roll off a dealer lot, and these six or seven-year loans could hurt consumers and lenders both in the long run.
The U.S. Senate voted last week to kill rules that would prevent discriminatory auto lending. These Obama-era guidelines were meant to curtail lenders who offered higher loans based on race, religion, sex or national origin.