Some worry that longer loans borrow sales from future
Auto loans are stretching out in many cases to six years and sometimes to seven, according to analysts including Experian Automotive and Edmunds.com. Some observers, such as Honda sales chief John Mendel and Morgan Stanley analyst Adam Jonas, are worried the strategy is short-sighted. They say that though the longer loans are helping pump up current sales to a 16.5 million, seasonally adjusted annual rate (SAAR), they are lengthening the purchase cycle and will keep buyers out of the market longer.
Others, such as NADA chief economist Steven Szakaly, arenêt concerned. Szakaly says that with the average car on the road being more than 11 years old, people will pay off their loan before they are ready to buy a new vehicle, according to the Detroit News.
Analyst Jonas predicts that sales will rise to 17 million in 2015, a record-breaking 18 million in 2017, then drop to 14 million to 2019. This year, low interest rates, longer loan terms and appealing lease deals are keeping sales robust.Download Bulletin PDF