Experian recently reported that in the last three months, 17% of new car loans were issued with a term of 6 to 7 years. The amount of loans with these long terms has increased 55% from only 4 years ago. It is likely that lower household incomes combined with higher taxes and cost of living is forcing people to reduce monthly loan payments by extending the length of loans. Unfortunately, loans that are this long guarantee being upside down or having negative equity in your vehicle for a long time. This makes it expensive to sell or get out of the vehicle if your situation changes or if there is an interruption in your income.
There is no unique debt aspect to buying a car; it is personal consumption debt which is always a financial mistake. A vehicle is just a functional appliance like a computer, lawn mower, or dishwasher. These are items that depreciate in value until they are no longer functional. Like all purchases, they must be affordable to your level of income and purchasing vehicles with debt needlessly increases your cost by at least 25%. If instead you lease the vehicle, then you are nearly doubling your lending costs when you add up all of the additional expenses. Protect your income, net worth, and financial goals by purchasing vehicles only with cash.