Experts weigh pros, cons of long-term car loans


Buying new wheels soon? Long-term car loans are out there to keep your monthly cost down. But is it a good thing in the long run?

Veronica Viveros is in the market for a new car, but will soon have new demands on her monthly budget that force her to shop for a longer-term loan.

"I am expecting and we do have a lot of bills and finances. So, I'm looking at about $300 to about $350 a month. That would help out so much," Viveros said.

If she's in the market for a $23,000 car loan and wants to keep her payments to $350 a month, she will have to look at a 72-month loan. That means her new baby will be six years old and going into first grade by the time she pays off that car.

"The consumer that's opting for a $25,000 new car loan can save around $200 per month by opting for a 72-month loan as opposed to a 48-month loan," Kelley Blue Book Senior Analyst Alec Gutierrez said.

A $350 monthly car payment can be enticing for many people, but it also could be very risky.

"The longer you extend your term, the longer it's going to take you to get out of a negative-equity position. So, those that take a longer term find themselves at greater risk of being under water for a longer period of time," Gutierrez said.

And that doesn't take into account what could happen over all those years. A car accident or a blown engine can devalue the car, putting consumers with long-term loans into a bigger financial bind.

That said, more and more people are sticking with the same set of wheels further down the road.

"The trend in the last 10 years is people have kept their cars longer. The cars have been built better," said Steve Foresta, general manager at O'Hare Auto Group.

Viveros is leaning towards a six-year car loan. That way her car expenses can take a back seat to the money she needs for her growing family.

"It would work out great for me," Viveros said.

Remember, interest rates on loans that go 72 months or longer will be higher. Be sure to figure out what you can afford before going to the car dealer.

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