The Risks of Long-Term Car Loans: Why Experts Warn of Being Underwater

Rising Car Prices and Loan Terms

• 🚗 The average new car price is nearing $48,000, a significant increase from five years ago.
• 📈 This price surge has led many buyers to opt for longer loan terms to manage monthly payments.

The Dangers of Extended Car Loans

• ⚠️ Experts, including those from NerdWallet, strongly advise against 72 and 84-month car loans.
• 📉 These extended terms can quickly leave borrowers "underwater," owing more on the car than its actual worth.
• 🛠️ A major drawback is that the car may require significant repairs, like new tires, while still being financed.

Expert Recommendations for Car Buyers

• 💡 Consider purchasing a less luxurious or cheaper new car to avoid long loan terms.
• leasing as an alternative that typically involves lower monthly payments.
• 💰 Making a larger down payment can also help reduce the need for extended financing and save money.