Bracing For A Fall? Trend Towards Seven Year Auto Loans Worries Automaker

Simple math, Auto manufacturers need to stop raising to cost of every vehicle year after year. There's a $70K Kia and Hyundai, isn't that saying something?

Why are you blaming car companies? If the consumer can't afford a particular car, he should be looking at a lesser car - not stretching himself thin to buy it. This lack of restraint on the consumers' part is what drives high credit card debt in this country and what drove, in at least some part, the housing crisis.

@ldott8, yes, I agree that the sticker price of cars keeps increasing. Sure, that's a result of the cost of technology and resources but it's getting harder and harder to find an "affordable" car that's of really nice quality.

@Young04, you're right, it's not just the car companies. A consumer who needs to look at a 7 or 8-year loan to purchase a $40k car probably should be looking at a $25k car instead. On a financed car, that's approx. a $300/month difference. Consumers definitely need to make better choices. HOWEVER, it does seem that the price of cars just keep growing at a much faster rate than the cost of almost any other consumer good. Then again, the technology, performance, and safety of today's cars are at a much higher level than ever. Like comparing today's smartphones with yesterday's flip phones.

@CCC, yes, leasing is definitely an option that most people are afraid of, mainly because of mileage. The other option if they want a nice car with nice technology and nicely equipped, go look in the used car lot.

@mre30 Yeah, I get what you're saying but what used to be entry level is now at mid luxury prices. Can you not see that?

That last comment was meant for @Young04 not @mre30

People who need a 7 year loan to afford the payments should just lease and if they drive too much to lease, move! :)

Why are the car companies worried? I don't think they are banks any longer. Ally Financial (i.e. GMAC) is no longer part of GM.

Car companies have nothing to worry about, as long as they are not the ones doing the lending.

Now, the question is...what happens when customers cannot get credit to make a vehicle purchase?

The "auto loan" market will be the next big lending disaster - as these people start defaulting on their 72 month auto loans. I think that crisis will precede the student loan crisis.

If as a buyer you're looking at a SEVEN year loan, you CANNOT afford the vehicle in the first place. Our stories will not write a contract beyond 5 years. The default rate on contracts beyond 5 years is MASSIVE.

If the car is a lemon buyers get into another contract on a new car and they stop paying. This creates "mala figura" between the dealer and the credit arm of the company.

With the leaps in technology currently happening, leasing is a very attractive alternative.

It does affect the manufacturers, weather they are the ones holding the note or not, because if those borrowers default on their 7 year loans, they wont have the credit rating to finance a new car in the foreseeable future.