Americans are willing to commit to longer debts than ever before to buy themselves a new car, according to new research.
Car shopping platform Edmunds says that the average length of an auto loan reached an all-time high in June, with buyers locking themselves into borrowing contracts for almost six years – at 69.3 months on average.
This is a 6.8 percent increase on the average length of loan contracts five years ago, and there's also been a hike in the average amount of debt buyers are saddling themselves with.
Edmunds found that in June, the average loan amount for a new car purchase hit $30,945, with the average monthly payment reaching $517.
To get the cars they want, Edmunds says people are stretching the length of the loan contracts to keep the payments low, though the longer a term is, the more they eventually end up paying because of interest.
Edmunds executive Jessica Caldwell said this is "financially risky," knowing that most new cars immediately lose chunks of value the second they're driven off the lot, but also says it's a sign that consumers are more confident in the economy to spend more on vehicles.
Many Americans can't afford a new car
CNBC reports the average price of a new car is currently at around the $33,000 mark, and many consumers could be over-extending themselves financially to buy one.
It cited Bankrate research that found average earners living in pretty much every major U.S. city can't comfortably afford to buy a new car.
This was based on applying the 20/4/10 rule to determine a new car's affordability: a combination of a 20 percent down payment, a four-year loan, and repayments that are no more than 10 percent of the household income.
Washington D.C. is the only metro area in America's 25 biggest where a median income household can afford a new car. D.C. has an average household income in excess of $100,000.