A top US executive at Honda Motor Co said competitors are doing "stupid things" to boost auto sales, including making seven-year-long car loans that harm buyers.

Automakers are increasingly selling vehicles with 84-month loans that reduce monthly payments while making it tougher to repay faster than cars lose value, said John Mendel, Honda's US sales chief. The Tokyo-based company will avoid longer-term loans even as Nissan Motor Co tries to supplant it as the fifth-biggest automaker in the US, he said.

"You're ringing the bell on a new-car sale, but that customer is saddled - they're stretched so thin," Mendel said at the North American International Auto Show last week. Extended-term loans are "stupid not just for us, but for the industry".

The comments by Honda's Mendel were a rare show of caution during the auto show in Detroit, as auto industry executives cheered the best year of US sales since 2006. Deliveries are projected to rise to 16.7 million this year, which would be a sixth straight increase and extend the longest streak of gains since World War II.

Honda shares have gained 3.1 percent this year, compared with a 1.2 percent drop in Japan's benchmark Topix index. Toyota Motor Corp, the nation's largest carmaker, has risen 0.6 percent this year while Nissan is down 4.1 percent.

'Not pretty'

Sales will keep growing as the Federal Reserve's zero - interest-rate policy encourages investors to collect yield from auto loans, said Tom Webb, chief economist at Manheim Consulting. While not in a bubble, the industry is taking on more risk by extending longer loans with smaller down payments to buyers with blemished credit scores, he said.

"We've seen this movie before, we know how it ends, and it's not pretty," Webb told reporters at an event before last week's show. "But I say that it has longer to run, and we have already paid the price of admission. So we might as well stay to the end. You just keep your eyes on the exit door."

Negative impact

More than one in four new-car loans in October and November were 73 to 84 months long, according to Experian Plc. The share of new-car loans at those term lengths was less than 10 percent in 2009 and 2010.

"It can have some negative impact on the market in creating a vicious cycle of negative equity if the consumer doesn't hold onto their vehicle long enough," said Melinda Zabritski, senior director of automotive finance for Experian. "Something has to be done to keep the market affordable, or consumer buying is going to have to change and we'll have to return to less frequent purchases."

Honda's US deliveries will grow 2 percent to 4 percent this year to a record, driven by three new or updated utility vehicles: the subcompact HR-V, the compact CR-V and the mid-size Pilot, Mendel said.

Nissan, the sixth-largest automaker by US sales, narrowed the gap with Honda for the second straight year in 2014. The Yokohama, Japan-based company trailed Honda by fewer than 20,000 vehicles, or less than the number of Civics sold in December.

(China Daily USA 01/22/2015 page16)