Are the Recently Introduced 97 Month Loan Terms A Recipe For Disaster?

Last month Nakisha Bishop took out a loan to buy a $23,000 Toyota Camry and pay off several thousand dollars still owed on her old car. The key to making it work: she got more than six years—75 months in all—to pay it off.

"I had a new baby on the way, and I was trying to keep my monthly payment a little bit lower to help afford child care," Ms. Bishop, a 34-year-old sheriff's deputy in Palm Beach County, Fla., said recently. She pays $480 a month for the 2013 Camry, just $5 a month more than the note on her old car. The car won't be paid off until her 1-month-old daughter is heading to first grade



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USNA1999 - 4/10/2013 12:42:00 PM

-1 Boost

This country just doesn't learn! This is just like the 40 year mortages and the subprime mortage mess. People buying things that they cannot afford in the first place but thanks to Obama and his buddies this will continue.

Carzak - 4/13/2013 10:47:26 AM

+1 Boost

There are several issues these types of loans unwittingly create. First, if someone is upside down in a car loan and is trying to downsize/upsize with very little to no cash this buries them further.

As pointed out in the article, the other net effect is that these types of loans will cause consumers to hold on to their vehicles much longer depressing future new car sales.

Also it does little to help new car dealers with repeat sales based on shorter ownership cycles. As these longer term loans take hold, used cars may become the dominant preference over new for the majority of price sensitive buyers.

adoptgreyhounds - 4/10/2013 12:53:39 PM

+3 Boost

YES! You are getting screwed if you do this.

Agent009 - 4/10/2013 2:03:16 PM

+2 Boost

Combine a 97 month sub-prime loan at 21% and you have trouble.

Absolutely crazy

Agent009 - 4/10/2013 2:15:26 PM

+1 Boost

Given the example in the article if she got a standard 2.99% interest rate she financed about $33K for that $23K Camry. OUCH!

ParadoX - 4/10/2013 3:13:25 PM

+1 Boost

This is the problem with America. Everybody finances everything, they don't pay for it. If you can't afford a car, buy a used car. Put money aside every month until you have a chunk of change that can buy something better.