NEW ORLEANS – Dealers are resistant to customers extending the length of their car loans too much in order to push down monthly payments. But ultimately it is the customer’s choice, auto retailers say.
“Do we like 84-month loans? No,” says Brian Leary, vice president-finance and insurance for the Larry H. Miller Dealerships based in Sandy, UT. “But if that is the only option available for the customer, we need to use it to get them in a vehicle.”
He speaks at an American Financial Services Assn. conference held in conjunction with the National Automobile Dealers Assn. convention here.
Consumers who take a long time to pay off their loans can run into negative equity issues. Dealers also dislike that those customers potentially are out of the market longer than someone with shorter loan terms.
“Long-term financing is not good for the industry,” says David Williams, an NADA director and dealer principal at Anchor Buick GMC in Elkton, MD. “A 97-month loan is not good.”
Leasing is an option to long loans, he says. “We must educate customers on leasing. Leasing is good for the industry.”
The length of a loan primarily typically is up to the customer, says incoming NADA Chairman Forrest McConnell III. “If they can afford 60 months, they don’t need 72 months. But ultimately, it is their decision.”
Victory Automotive Group based in Ann Arbor, MI, tries to get customers to opt for shorter loans, Chief Operating Officer Rodger Olson says at a J.D. Power conference tied to the NADA convention.
“We are constantly trying to push down loan terms from 72 to 60 months and promote leasing,” he says.
Loans of 72 months and beyond now finance 30% of auto deliveries, says Deirdre Borrego, a J.D. Power vice president. “It’s not stretching much beyond 72 months.”