Page 58 - Book6E

The Signs of Overspending for Cars Are Everywhere
Weston tells people if they’re constantly broke and can’t figure out why, the answer may be sitting in their driveway. Americans are spending more on their vehicles than ever before—more than $8,000 a year on average—and it’s driving some to the breaking point. Average transpor- tation spending grew more than 12% between 1999 and 2005, accord- ing to the U.S. Bureau of Labor Statistics, at a time when median income growth was basically flat. Even when adjusted for inflation, Americans are spending more: 8.3% more in 2005 than in 1995, with people in the lowest and highest income brackets accelerating their spending the most.
More than 80% of car loans are for terms longer than four years (just two decades ago this was considered a long loan). The average loan term has grown from just under four years and seven months in 1990 to over five years and four months in 2006. Longer loan terms mean that people build equity in their car more slowly, which in turn means that borrowers will be “upside down” on their vehicles—owing more than they’re worth—for three years or more on the typical purchase.
Wait Until You Can Pay Cash For That Car