Last month Nakisha Bishop took out a loan to buy a $23,000 Toyota Camry and pay off several thousand dollars still owed on her old car. The key to making it work: she got more than six years–75 months in all–to pay it off.
“I had a new baby on the way, and I was trying to keep my monthly payment a little bit lower to help afford child care,” Ms. Bishop, a 34-year-old sheriff’s deputy in Palm Beach County, Fla., said recently. She pays $480 a month for the 2013 Camry, just $5 a month more than the note on her old car. The car won’t be paid off until her 1-month-old daughter is heading to first grade.
Ms. Bishop’s 75-month loan illustrates two important trends rippling through the U.S. auto industry. Rising new-car prices and competition among lenders to attract borrowers is pushing loans to lengthier terms. In part, banks see the longer terms as a way to attract buyers, by keeping monthly payments under $500 a month.
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