A long-term car loan is one lousy deal

People, have we learned nothing from the financial crisis? Edmunds.com announced that in October the average length of a car loan was 67 months. And that's just the average. Nearly one in four new loans earlier this year was financed with a loan that lasted between 73 and 84 months, according to Experian Automotive.

I want to be clear: Any car loan greater than 36 months is a sign of financial irresponsibility.

I am not at all surprised that lenders pushing car loans—especially the financing arms of auto manufacturers—are offering these insanely long loan terms. They are in the business of needing to sell their product, and given that household income has not gone anywhere for years, they know the only way to move cars off the lot is to entice buyers by offering longer loan terms that magically make an unaffordable car look affordable.

And it's not as if a car dealer is ever going to recommend you buy a less expensive car to keep the payments affordable and get the loan paid off in just three years. No one with something to sell—something they sell on commission—is ever going to look out for your best interests.

But what bothers me is that so many consumers are falling for this.

Suze Orman
Source: CNBC
Suze Orman

The fact that your total interest payments will be higher the longer your loan term is obvious. That you are choosing to lock yourself into this lousy deal for a lousy investment is what boggles my mind. Yes, every shiny new car is a lousy investment. You are guaranteed to lose money on it. No one who has ever bought a new car has eventually sold it, or traded it in, for more than they paid.

And it's not just a bad car investment. You are totally messing with your financial future. A new analysis by RealtyTrac found that for consumers with debt, it's not necessarily higher down payments that keeps home buying out of reach. It's that potential homebuyers have too much existing debt to be able to qualify for a mortgage. That typically includes student loan debt and auto loan debt.

Read MoreThe biggest threat to our economy? Student loan debt

If you really care about building financially security, you would never take out a car loan greater than 36 months. Will that mean buying a less expensive model? Of course. That's the point! You should want to spend the least amount possible—and get out of debt fastest—on a purchase that is bound to lose your money. Do that and you'll have more money to put toward the spending that really matters, such as building an emergency savings account that covers eight months of expenses, putting more money into your retirement savings accounts, and being able to qualify for a mortgage if owning a home is a priority.

Being financially smart is a never-ending process of making the right choices. A long car loan is one dumb move.

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