According to Bloomberg, car loan defaults are higher than they were in 2009. The was the worst year of The Great Recession. One reason is that car companies and financial institutions offer loans that can stretch to 84 months. With high interest rates these can take 40 weeks of income to pay off for a middle class income buyer. That means nearly a year of income to pay a seven year car loan.
The long duration car loan risk is not limited to a few people. According to Cox Automotive, 27% of buyers take loans payable over a period of 73 to 84 months. Interest rates on these loans can reach 6%, which accounts for much of the 40 week payback period
The 84 month loan has a good chance of colliding with a recession. Recessions come in one decade cycles on average . The odds of an overlap with an 84 month car loan is considerable. Default rates on car loans generally rise as GDP falls.
Does an 84 month car loan look good on paper? If monthly payment sizes are the only yardstick. Beyond that, car buyers with long duration loans are usually fools.
These are the deadliest cars to drive in America.
Credit Card Companies Are Doing Something Nuts
Credit card companies are at war. The biggest issuers are handing out free rewards and benefits to win the best customers.
It’s possible to find cards paying unlimited 1.5%, 2%, and even more today. That’s free money for qualified borrowers, and the type of thing that would be crazy to pass up. Those rewards can add up to thousands of dollars every year in free money, and include other benefits as well.
We’ve assembled some of the best credit cards for users today. Don’t miss these offers because they won’t be this good forever.
Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
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