09 November 2017

Mine Is Longer Than Yours

It's been some years now that auto loans have moved from the early long history of three year duration to as much as 8. There have been a few missives on the subject in these endeavors, mostly along the line: such loans exist for the sole purpose of lowering the monthly nut of the loan, thus making car purchases possible by folks who can't otherwise do so. The same thing (i.e., bend the norms to lower the nut) happened in housing with the run-up to the great recession.

And, it's been a while since the mainstream media took a look. Today brings some reporting.
... the CFPB noted that they're used especially by consumers with lower credit scores. The average credit score for buyers who take out six-year loans is 674. That's 39 points below the average for consumers who took five-year loans.

Note that 5 years is now defined as the new normal. It isn't.

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