Aug
3
Auto Finance Trends Shift Towards Long Term Auto Loans
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John Collins asked:
Auto finance companies in the U.S. are switching to longer term car loans, in an attempt to downsize their involvement in the leasing business.
Longer term auto finance loans have a slower repayment of principal, as well as increase the risk of losses resulting from defaults in payments. Leasing companies in the auto finance industry also have to cushion themselves with reserve funds to make up for possible losses from these car loans.
Longer term car loans now stretch as long as7 years or 84 months. GM, Ford and Chrysler LLC, consider long term auto loans as a way of shedding heavy inventories. Soaring fuel prices have caused a catalytic decline in consumer confidence and have hit the fortunes of auto makers, who are now faced with plunging sales especially in the pickup trucks and sport-utility segments.
Longer term car loans such as 72 or 84 months, can reduce monthly payments for buyers, putting them on par with payments under leasing agreements. However long term car financing heightens the risk factor of defaults, as the unpaid principal would be higher than that of a short-term loan. Auto financing companies need to factor the loss perspective into the prices charged to customers who avail such loans.
Approximately 20% of U.S. auto sales are conducted by leasing companies, who offer lower monthly payments on vehicles. However under today’s credit crunch, leasing has lost its lucrative edge amid dipping resale values. You can visit 5minuteautoloan.com for more auto finance tips and latest automotive news.
Nellie
Auto finance companies in the U.S. are switching to longer term car loans, in an attempt to downsize their involvement in the leasing business.
Longer term auto finance loans have a slower repayment of principal, as well as increase the risk of losses resulting from defaults in payments. Leasing companies in the auto finance industry also have to cushion themselves with reserve funds to make up for possible losses from these car loans.
Longer term car loans now stretch as long as7 years or 84 months. GM, Ford and Chrysler LLC, consider long term auto loans as a way of shedding heavy inventories. Soaring fuel prices have caused a catalytic decline in consumer confidence and have hit the fortunes of auto makers, who are now faced with plunging sales especially in the pickup trucks and sport-utility segments.
Longer term car loans such as 72 or 84 months, can reduce monthly payments for buyers, putting them on par with payments under leasing agreements. However long term car financing heightens the risk factor of defaults, as the unpaid principal would be higher than that of a short-term loan. Auto financing companies need to factor the loss perspective into the prices charged to customers who avail such loans.
Approximately 20% of U.S. auto sales are conducted by leasing companies, who offer lower monthly payments on vehicles. However under today’s credit crunch, leasing has lost its lucrative edge amid dipping resale values. You can visit 5minuteautoloan.com for more auto finance tips and latest automotive news.
Nellie