Extended Payments - Beware!

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SEE ALSO: Total Cost of Ownership

Washington DC May 22, 2007; The AIADA newsletter reported that low monthly payments and no-money-down deals have long been used to shore up car sales in a slumping market.

But auto buyers who opt for longer loan terms are more likely to wind up owing more on their car loans than their cars are worth. The Wall Street Journal reports that the popular expression to describe those people is that they are "upside down."

Last year, about 29 percent of car buyers who traded in a vehicle to buy a new one owed more on their car loans than their cars were worth, compared with 20 percent five years earlier.

Researchers say few car buyers know the actual full cost of their vehicles or stop to consider how much more expensive it is to take on a longer-term loan. As overall vehicle sales have flattened or slumped in recent years, car makers and dealers have looked for new ways to make their wares attractive to potential buyers.

Low monthly payments have been one of the surest ways. The downside is that the deal may require stretching the terms of the new loan to seven or eight years.