The average car loan now stretches to 72 months. Six full years. That's longer than most marriages in this country and somehow less fulfilling.
People are financing vehicles for the same amount of time it takes to get a bachelor's degree. Except at the end you don't get a diploma. You get a 2021 Nissan Altima with 80,000 miles and a resale value that makes your credit score look impressive.
The logic goes like this: stretch the payments over six years instead of three and you cut your monthly bill in half. Genius math. You pay less now and only slightly more than the GDP of Belgium in interest later. The car depreciates 60% while you still owe 90% of what you borrowed. Upside-down doesn't begin to describe it. You're in a financial Stranger Things scenario except there's no Winona Ryder coming to save you.
Lenders love this. They get to collect interest for 72 months on an asset that becomes worthless in 48. It's the financial equivalent of selling somebody a sandwich on an installment plan that runs past the expiration date.
But the monthly payment fits the budget. That's what matters. Never mind that you'll spend year five making payments on a transmission that grenaded in year four. Never mind that the catalytic converter got stolen twice and your comprehensive deductible is higher than your self-esteem.
The technical analysis here is simple. If you need six years to afford something that loses value the moment you sign, you can't afford it. But retail traders don't do technical analysis. They do monthly payment analysis. And monthly payment analysis has never met a bad decision it couldn't justify.
Seventy-two months is long enough to have a kid and send them to kindergarten. Or to finance a car you'll hate by month eighteen and still be paying off when it dies on the side of I-95 with a blown head gasket and a cabin that smells like regret.
Photo by Mehdi Mirzaie on Unsplash
Leave a Comment