According to the Federal Reserve, the average new car loan right now is more than $27,000 over more than five years.
"Is it fun? Yes, I love my car, but was it a good decision? Absolutely not," said Bogi Lateiner, who owns 180 Degrees Automotive in Phoenix. She decided to buy a new car, to the tune of $500 a month. She said while she can manage the big payment, many people who come through her doors have bought more car than they can afford.
"That's the sticker shock that a lot of people get surprised by," Lateiner said, speaking of the added costs of maintenance, repairs, insurance and registration.
"If there is a slight downturn in the economy or if gas prices shoot back up, these folks are going to be challenged, and that's going to have an impact," said Mike Sullivan with the financial counseling group Take Charge America. He said while car loan delinquencies are still relatively low, sub-prime borrowers are on the rise and lenders are taking on more risk.
"Even your first car, you should have a down payment," Sullivan said. "By your second car, your down payment should be significant. By your fifth car, you should be close to paying cash."
He's worried we could be headed for another bubble.
"When people can't make all of their payments, something is going to fall by the wayside," Sullivan said. "We've seen already with student loan payments with delinquency rates going up; we're likely to see again mortgage delinquencies."
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