US: consumers going for longer and steeper debt when getting a new car image

The automobile business in the United States is posting results that have not been seen for a decade, which has people wondering if it’s not very close to the usual peak that is followed by a traditional, steep, downward momentum.

In layman’s terms, many experts are wondering if the auto industry is heading towards the same result as it did during the last Great Recession, with a bubble building rapidly and getting ready to burst. Others are asking an even more crucial question – is the economy today so much healthier that continued growth might actually be sustainable? The National Automobile Dealers Association is forecasting more than 17 million new cars and trucks will be sold this year, the best tally since 2005. And the bubble is usually triggered by massive incentives from the carmakers, which are delivering loads of cash towards the slow selling models and the ones being utterly competitive to keep the good times rolling. But according to Kelley Blue Book, the average transaction price has reached $33,340, around $1,000 more than during the same period last year.

This is a reflection of both increased costs and growing consumer tastes. And to cope with the higher fees, Americans are taking higher debt and for longer periods. Experian Automotive says longer-term new-car loans that go up as far as 84 months – seven years, which is about four years longer than a typical warranty period – now reached a record tally of 29.5 percent of all new vehicle financing. Even more, the amounts being financed and the monthly installments have reached new heights: the average new vehicle loan is at $28,71, with a rate of $488.

Via Forbes