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September 5, 2008 11:32:42 PM CDT

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Americans Drive Cycle of Auto Debt

Posted Dec 31, 07 9:25 AM CST in US,  Business 

(Newser) – More and more Americans are entering a cycle of larger, longer, and far riskier auto loans, raising the possibility of a debt crisis similar to the one that has hit the housing market. The Los Angeles Times explores the increasing trend of trading in a used car for a new one—and rolling together old debt and new.

About 45% of new auto loans are now longer than 6 years, with the average amount reaching $30,738—a 40% rise this decade. And longer-loan terms mean many are paying balances that far exceed the value of the car. One finance exec says this recent American habit "is like a drug. Once you get hooked, it gets harder and harder to break the cycle."

Source Los Angeles Times

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Americans are increasingly rolling their old debt into new cars, and new loans.   (Getty Images)
New auto loans are frequently larger, with the cost spread out over six or seven years so as to keep monthly payments down.   (Getty Images)
Some analysts fear the risky loans could have severe repercussions when consumers are unable to pay them off.   (Getty Images)
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credit crisis  • Detroit  • debt  • credit  • auto loans


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