Special Report

The 84 Month Car Loan

Citysqwirl / iStock via Getty Images

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.

Get Ready To Retire (Sponsored)

Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future

Get started right here.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.