When Jennifer Perry, an accounting assistant at Community Bakery, pulled out of a dealership in 2013 with a new Subaru Forester, she also drove away with a six-year commitment.
Perry signed a 72-month car loan, raising her family's number of car payments to three. Perry said the longer loan made her monthly payments lower, allowing her to afford the car.
"It was on top of other car payments, that's why I needed it," she said.
Now Perry, 40, has four years left on her loan. She said she won't buy a new car until the Forester is paid off.
"I wouldn't necessarily recommend it for most people," she said. "Unless you need it financially, if that's what you need to get you into a reliable vehicle."
More Americans like Perry are taking out longer-term car loans than ever before, but financing experts in Arkansas say it's not such a good idea.
Mark Foster, education director at Credit Counseling of Arkansas, said five years used to be the standard length of a car loan. Now it's more than six. According to data from credit-reporting firm Experian, long-term loans lasting 73 to 84 months set a record of 29.5 percent of all new-car loans. That's up 4.6 percentage points from the same time last year.
"If you have to go longer than five years, you really can't afford that vehicle," Foster said.
The average new-car loan reached an all-time high of 67 months during the first three months of 2015, according to a report by Experian Automotive. The lengths on used-car loans also set record numbers at 62 months. Experian began tracking this data in 2006.
Mark Jones, a counselor in Bentonville for Credit Counseling of America, said he sees clients who have overwhelming debt, partly because they take car loans that are too long.
"It's an unforeseen hardship that families impose on themselves," he said. "Most people are only thinking about the monthly payment."
Jones said the car's value can go down faster than its owner can pay off the loan. Then if a car owner falls into debt, he would owe more than the car is worth.
"The circumstance traps them in a loan," he said. "You can't sell the car because no one will pay you now what you owe."
He said there is no good solution for someone who cannot pay off a long-term car loan.
"That's a trapping kind of debt," Jones said.
Dennis Jungmeyer, president of the Arkansas Automobile Association, said the people most likely to take out a long-term loan are first-time buyers or those with poor credit.
"It allows people with lower credit scores to qualify," he said. "More people can get a loan now than ever before."
The average credit score for Arkansans is 601, the third lowest in the country, according to Credit Karma, a personal finance website. Mississippi had the lowest average credit score of 592; Alabama was second at 600. A perfect score is 850.
Jones said the standards to qualify for car loans are surprisingly low in Arkansas.
"I see people with a credit score that wouldn't qualify them for a mortgage, but they can still get a pretty big car loan," he said.
Foster said a common mistake car buyers make is focusing on the monthly payment of a car, not the total cost.
"Oftentimes people will finagle things along so that they will have a low monthly payment, but that just stretches it out so long that by the time you get the car paid off, you almost need another car," he said. "It's like shooting yourself in the foot."
Foster said he counsels people to consider buying a used car.
"Cars depreciate so much in the first three, four years of its life," he said. "You lose thousands of dollars just driving it off the lot. Let someone else take that hit."
SundayMonday Business on 06/08/2015