Connect with us

Personal Finance

Car loan terms stretch as vehicle prices remain high

Published

4 months ago

on

Olga Rolenko | Moment | Getty Images

For a growing share of car buyers, paying for a vehicle is a seven-year commitment.

A record 22.9% of financed new-car purchases in the first quarter involved loans of at least 84 months, according to new data from car shopping and research site Edmunds. That’s up from 21.2% a year prior. A decade ago, it was 10%.

The average amount financed for new cars also reached a record high, climbing to $43,899 in the first quarter, up from $41,473 a year earlier, Edmunds data shows.

A look at the pulse of the auto consumer

As the amount continues to climb, “consumers are having to work harder to make the numbers fit — a clear sign of how strained affordability has become,” said Jessica Caldwell, Edmunds’ head of insights.

Average sticker price staying above $50k

The average sticker price on a new car in March reached $51,456, marking the 12th consecutive month that it’s been above $50,000, according to Kelley Blue Book. The average transaction price after incentives was $49,275, up 3.5% from a year earlier.

Read more CNBC personal finance coverage

That amount is “reflective of a market that favors large, expensive vehicles,” said Erin Keating, an executive analyst for Cox Automotive.

The share of new-car buyers earning less than $100,000 was 37% last year, down from 50% in 2020, according to Cox Automotive.

‘Think twice’ about a seven-year loan

Higher vehicle prices come as many households have been clobbered by ongoing high inflation that has yet to settle down to the Federal Reserve’s target of 2%. The consumer price index, a key inflation measure, rose 3.3% in March from a year earlier, according to the U.S. Bureau of Labor Statistics’ latest reading, released Friday. That’s up from 2.4% in February.

For car buyers whose budgets need to accommodate higher costs in many areas, stretching out their auto loan for as long as possible may be the only way to afford the payments, said Matt Schulz, chief consumer finance analyst at LendingTree.

“For a lot of people, it’s all about the monthly payment, but the extra cost for financing that car for seven full years is really high,” Schulz said.

“Generally speaking, a seven-year auto loan is something that you really need to think twice about because it’s so expensive,” Schulz said. “If the only way you can afford that vehicle is to finance it for seven years, it may be worth thinking about whether you may be buying a little too much car for you.”

To illustrate the cost of financing: A $43,899 loan at 6.9% — the average in the first quarter, Edmunds found — for 84 months would result in a monthly payment of $660 and would cost you $11,575 in interest over the full life of the loan, according to Bankrate’s auto loan calculator.

A five-year loan (60 months) at the same rate would mean paying $8,132 in interest over the life of the loan — $3,443 less. But the monthly payment would jump to $867.

If you don’t have good credit, the interest rate you’re charged is higher. By way of example: To finance that same amount ($43,899) for 84 months at 13.17% — a recent average rate for borrowers with a credit score of 501 to 600, according to Bankrate — the monthly payment would be $803, and the interest paid over the life of the loan would be $23,525.

And, typically, the longer the loan, the higher the interest rate, Schulz said.

Of course, other factors are considered in the lending decision, including your income, employment and existing debt, as well as how much of your income the monthly payments would eat up.

Depreciation can lead to being ‘underwater’ on your loan

Because of how quickly new cars depreciate, Schulz said, there’s a risk of being “underwater” on your loan fairly quickly when you opt for a longer repayment term. That is, you owe more on the car than it’s worth, also known as negative equity. New cars typically lose about 20% of their value in the first year after purchase and about 55% over five years, according to Kelley Blue Book.

When consumers trade in a car with negative equity, that balance typically gets rolled into a loan for the new car. That larger balance can make it more likely that a buyer will choose a longer loan.

About a third of buyers owe more than their trade-in is worth and roll the remaining amount into the loan on their new car, according to JD Power. That share is similar to pre-pandemic behavior.

About 40.7% of new-vehicle purchases involving negative equity are now financed with 84-month loans, according to Edmunds data.

Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.

Related Topics:
Continue Reading

Personal Finance

$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

Published

1 day ago

on

August 8, 2026

By

The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

Continue Reading

Personal Finance

Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

Published

3 days ago

on

August 7, 2026

By

Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

Continue Reading

Personal Finance

Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

Published

1 week ago

on

August 1, 2026

By

As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

Continue Reading

Trending