Editor's Commentary: Stretching Car Notes Into 'Car Mortgages' Is Leading To More Buyers Being Late On Payments

We all have wants and desires. About a decade ago I penned an article for a national financial publication on consumers steering into ‘Car Mortgage’ territory. The coined term is still appropriate today, as the average transaction price of a new car climbing to approximately $36,500.

Three years ago I can remember reviewing a loaded-up Mazda CX-5, which is a midsize crossover. The car priced-out at $36,000. Today, a comparable vehicle lists for $40,000. And added to that, a recent first quarter study revealed a record 7 million consumers are 90 days late on their car payments. These stats are appalling especially since the numbers weren’t this high during the Great Recession literally 10 years, when the economy was in the ditch. The study highlighted a number of these buyers are under the age of 30.

So, like me, you're probably wondering what’s driving this?

• Consumers are biting off more than they can afford. With the average new car payment hovering around $550 a month and the desire to have the latest high-tech gadgets, car buyers are stretching their car payments from 6 to 7 to 8 years .. and in some cases 9 years. Yes, that’s car mortgage territory. Couldn’t you forego the navigation system and instead use your smartphone, which has some of the same features.

• Buyers appetite for trucks and fullsize SUVs are thirsty too. Trucks and SUVs have becoming the new luxury flagship vehicles, as prices approach $100,000, when loaded with wall-to-wall leather and all of the latest self-driving aids. Trucks, SUVs and crossovers account for 70 percent of today's new vehicle sales, as coupes and sedans sales have slid in reverse, accounting for barely 30 percent of the market. These days consumers can get a great deal on a car, if they're willing to sacrifice riding up high and some of the additional utility space provided in a crossover, SUV or truck.

• Car buyers aren’t seeking pre-approval before stepping on to a lot. Credit Unions are a great place to start the car-buying process. Find out your rate and what you can afford first. This could place you in the driver's seat ensuring a competitive rate once you're seated across from the finance manager at the dealership.

• What are you bringing to the negotiation table? With car prices rising faster than our yearly raises, consider saving up money. A sizable down-payment can help reduce the length of the loan, decrease the interest rate, lower the car payment and drive down the overall cost of the car.

• Consider buying a pre-owned vehicle. Why not allow someone else to take the depreciation hit on the vehicle? There are a number of 2 to 3 year old off lease or service loaner vehicles that are available with certified warranties that are thousands to tens of thousands less than a comparable new vehicle. The average transaction price of a used vehicle is approximately $20,000. Many of the pre-owned models also have the latest high-tech features and driving aids such as a blind spot lane changing system.

• Consider the reliability of the vehicle. No matter if you’re buying a new or pre-owned vehicle, one should never make the assumption all quality is equal. Refer to JDPower.com and Consumer Reports to see what actual car buyers have said about the quality. This could mean the difference between the car nickeling and diming you throughout ownership or the vehicle being relatively trouble-free.

By taking heed of these simple suggestions, this could keep you in the driver’s seat.