THE DEALER GOT ME TO MY DESIRED MONTHLY PAYMENT
That seven-year car loan on a purchase feels painless right up until it isn’t.
More buyers than ever are signing 84-month terms because the monthly payment fits. That’s the trap. A car loses a big chunk of its value in the first few years, and a seven-year loan pays down principal so slowly that you can owe more than the car is worth for years.
That’s negative equity, and it compounds. Nearly 3 in 10 trade-ins are now underwater, averaging over $7,000. Where does that balance go? Rolled into the next loan, on top of the next car’s price. You end up financing a car you no longer own.
It also takes you out of the market for a much longer time. It also indirectly hurts dealers and manufacturers. A $700+ car payment eats the debt-to-income room you need for a mortgage, and it locks you out of the next vehicle you actually want because there’s no equity to trade.
None of this is a lecture. If the payment only works at 84 months, the car is too expensive. Buy less car, put more down, or keep the one you have. Your future self gets to choose what’s next.
The numbers are current: 84-month loans hit a record share of new-car financing, underwater trade-ins average $7,214, and the average new-car payment is $767 with most loans now over 61 months.
Be smart out there.
