(WXYZ) - Long-term car loans are gaining traction among some car buyers, including those struggling to make ends meet.
"The consumer that's opting for a $25,000 new car loan can save around $200 per month by opting for a 72-month loan as opposed to a 48-month loan," says Alec Gutierrez, the Senior Analyst for Kelley Blue Book.
Veronica Viveros is in the market for a new car, and with a baby company, she's tightening her finances.
"I'm expecting and we do have a lot of bills and finances. So, I'm looking at about $300 to $350 a month," Viveros says.
A $350 monthly car payment can be enticing for many people, but it also can be risky.
"The longer you extend your term, the longer it's going to take you to get out of a negative equity position. So, consumers that take a longer term find themselves at greater risk of being under water for a longer period of time," explains Gutierrez.
And that doesn't take into account what could happen over all those years. A car accident or a blown engine can devalue the car, putting consumers with long-term loans into a bigger financial bind. That said, more and more people are sticking with the same set of wheels further down the road.
"The trend in the last 10 years is people have kept their cars longer. The cars have been built better," explains Steve Foresta from the O'Hare Auto Group.
And experts point out not all long-term loans are bad.
"A general rule of thumb is that consumers should try and keep their monthly payments within 20% of their gross income. so, if that means you have to opt for a five or six year loan, that generally makes sense.
But most experts do not recommend 96-month loans, which are also now available. Whatever you decide, figure out what you can comfortably afford to pay for a new car before you go to the dealer... And remember that interest rates on loans that go 72 months and beyond will be higher than traditionally loan periods. Be sure to shop around before you hit the car dealer by comparing costs at sites like bankrate.com , kbb.com or edmunds.com
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