Stay away from seven-year car loans
Posted by Daniel Vasquez - Sun-Sentinel.com
The following blog entry was also posted online at www.leasetrader.com.
Some car manufacturers are toying with extra-long auto loans, including Toyota and GMAC, as well as some credit unions. For most consumers, it's a bad, bad deal.
Initially, the lure is compelling: Loan terms for 84 months to 102 months can bring low monthly payments. But, how many consumers actually know what their financial situation will be in seven years or more?
It's worth noting that many car buyers end up trading their cars in after three or four years. So a long-loan package can keep you driving a car a lot longer that you normally would. And the older the car, especially when it is not maintained properly, the more likely you'll pay high repair shop bills.
These long-loan packages also may end up leaving consumers with the same problems associated with failing mortgage loans that have hurt so many in recent years. Job or budget situations can change vastly over such a long time period, which means what you can afford to pay now may change drastically in seven years.
At least with property, the value usually goes up over time. With most cars, the opposite occurs. Typically cars lose 50 percent of their value in three years. So with a 7-year loan, a buyer will be paying for a car for up to four years that is clearly not worth its price.
Another big downside is the extra fees paid for long-loans. A $20,000 car, at 84-month terms, will cost at least another $5,335 in interest alone, according to LeaseTrader.com. That's roughly a quarter of the entire car's price.
In today's economy, it pays to be conservative with your budget. If you can't afford the car you want at 3 or 4-year loan terms, it may be better to hold off and save for a larger down payment. That's the best way to lower monthly payments.
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This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com.
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com