Following the huge increase in foreclosures across the country, repossessions of vehicles are up 10% nationally over the year before. Most people finance a car based on the monthly payment and to accommodate those borrowers, lenders are now offering car loans as long as SEVEN years!
While the monthly payment might be low, overall this increased time is increasing the total amount you are paying for the vehicle, but also increases the likelihood that you will rolling negative equity in your car into your next car loan. After all, who wants to be paying on a car than is six or seven years old?
The trend is to fall to the car dealers marketing. Trade in your old car and roll the balance of the remaining loan into the new car purchase. Sooner or later, that car payment will grow beyond your ability to continue paying. Remember, with every new car purchase comes the increased costs of operating a new car; increased insurance, increased registration or property taxes, and increased car payments.
Recently, a Bankruptcy Judge in Connecticut refused to give a lender the upper hand in forcing a reaffirmation of a car loan in a bankruptcy case. Creditors believed that when they re-wrote the Bankruptcy Code, they would force consumers to reaffirm their car loans. That failed because the language is so awkward.