Automobile loans are one of the most prevalent forms of loans in our country. Over 70% of car purchases involve a loan, and this number jumps to almost 85% for new car sales.
Unfortunately, many auto purchasers are not properly assessing their ability to pay these loans. Auto loan payment delinquency is at its highest rate since the 2008 recession. In fact, 2.6% of car purchasers who took out an auto loan in the 1Q of 2014 have missed at least one loan payment in the last year. This is the highest delinquency rate since 2008, when it reached 3%.
One of the reasons for this rise in delinquency is the fact that dealers are offering longer-term loans (some across 6-7 years) to consumers with lower credit ratings. While these loans require lower monthly payments, they feature higher interest rates, and, of course, will take longer to pay off than shorter-term loans.
Part of the responsibility, however, needs to fall on the shoulders of car purchasers, who need to do a better job of properly assessing the amount of auto loan they can afford. The Auto Loan Calculator below will help car purchasers determine the size of loan that works with their budget.
Questions & Answers - Compliments of Consumer Financial Protection Bureau (Click for answers)
What should I know before I shop for an auto loan?
Do I have to get a loan from my dealer?
How do I compare auto loan offers? What should I look at besides the monthly payment?
What is included in my monthly auto loan payment?
What is the difference between paying interest and paying off my principal in an auto loan?
What is the difference between fixed- and variable-rate auto financing?
What is the difference between the interest rate and the Annual Percentage Rate (APR) in an auto loan?
Can I negotiate the interest rate on an auto loan?
Where can I get info on auto loan rates?
Can the dealer increase the interest rate after I drive the vehicle home?
What is the difference between deal-arranged and bank financing?
What is the Manufacturer's Suggested Retail Price (MSRP)?
What is amortization and how does it effect my auto loan?
What is a loan-to-value ratio in an auto loan?
What is the difference between a simple interest rate and pre-computed interest in an auto loan contact?
How does a down payment affect my auto loan?
How does a lender decide what interest rate to offer on an auto loan?
What effect will shopping for an auto loan have on my credit?
Will an auto loan help me rebuild my credit?
Why might I need a co-signer to get an auto loan?
What is credit insurance for an auto loan?
How do I qualify for an advertised 0% auto financing?
What is negative equity in an auto loan?
What is Guaranteed Auto Protection (GAP) insurance?
What is a "no credit check" or "buy here, pay here" auto loan?
What happens to my credit if I am late making payments on my auto loan, or if my car is repossessed?
How do I know who my auto loan lender or servicer is?
What happens if I still owe money on the vehicle I want to trade in?
How do I find what my trade-in vehicle is worth?
What is a retail installment sales agreement? Is this a loan?
What is the difference between a manufacturer's warranty and an extended vehicle warranty or service contract?