This week I heard that Americans are sometimes refinancing not their mortgages, but their car loans!!

There was an economist expressing concern over whether or not the trend of obtaining seven-year car loans is smart for the buyer — and for the lender. Will new cars hold up their value to the extent that seven years after the purchase date that buyers will find it in their best interest to pay off the loan in full? Maybe. Today’s expectation is that most newer cars will run for well over 175,000 miles before being junked.

But seven-year loans are also being made for used cars.

I know that this is true. I am acquainted with someone who made it known that he did not pay off the loan for has last car, before deciding to buy a newer used vehicle. What is the term of the used car loan? Seven years.

Was the previous vehicle in near-junk condition? I don’t think so. He just wanted something newer.

Although he is eligible for social security, he made it clear that he couldn’t retire, in large part because his car payments and other debts are too high. He is working full-time.

He is sometimes in a bad mood due to his financial circumstances and not in the most confident state of mind. No wonder. Rather than having a nicer vehicle, he would probably sleep better if he had kept his old car.

Seeing this person’s tendency to borrow rather than being content with what he has, I would not be surprised if seven years from now he defaults on the loan and it is repossessed. After all, how much longer can he continue to work full time?

What about the lender? Will this loan prove to be a financial mistake and result in a loss? Lenders have expenses related to repossession.

In 2008, America saw the results of people choosing to live above their means, rather than appreciate what they had. We also saw that mortgage lenders were very willing to make foolish loans resulting in major losses.

Has America learned from the mistakes of the recent past?

Some financial planning, especially now, makes a lot of sense.