7+ year car loans?!?

[zeitgeist57]

http://www.autonews.com/article/20170531/FINANCE_AND_INSURANCE/170539958/new-car-loans-lasting-73-to-84-months-soar

 

Yikes. I mean, yikes.

 

Please, people...If your rag of a significant other has to drive some fancy $45k+ SUV for her to keep putting out, just lease it. You know she'll want out from under you and that SUV within the next 3-4 years anyway. Just because longer financing terms are available doesn't imply that a more expensive product is now within budget.

 

You're welcome for the free financial advice.

[Zx2guy19]

I finance all of my cars for as long as possible. I know I'll get shit for this, but welcome to the Kitchen. I can make more with my money than the .5% interest rate difference it takes to finance as long as possible (the truck is 75 months).

 

I also don't keep them long enough to matter

[Green Bastard]

The longer car loans are a good way to get upside down if you are replacing something every 4 years or less (also a good way to throw away money if you are able to afford a shorter term loan). Another reason I love my wife, we just replaced her Durango with an Equinox recently. We paid cash for it and it was pretty cheap (05, 108k miles, out the door for 3k), of course it needed a couple things, but I have a good reliable vehicle for years to come for under 4k invested right now, which makes her happy.

[Fiji ST]

Navy Fed and a few others will get you done for 8 years (96 months). Interest rates are still pretty low too, so people are pushing out the term longer and longer.

[Brandon]

I finance all of my cars for as long as possible. I know I'll get shit for this, but welcome to the Kitchen. I can make more with my money than the .5% interest rate difference it takes to finance as long as possible (the truck is 75 months).

 

I also don't keep them long enough to matter

 

Cash on Cash return.

 

I think like you.

[Geeto67]

I dunno....The Auto industry and how consumers buy and interact with cars is fundamentally changing and I think this is just one symptom reflecting that change. What's changing?

 

- Cars are getting more technologically advanced

- The cost of cars is increasing driving the prices up

- the average length of ownership has increased to 6.5 years from 4.3 years 10 years ago

- Cars are getting more reliable and durable, meaning they last longer and are cheaper to fix (the average age of cars on the road is 11.5 years as opposed to 20 years ago (1996) when it was 8.4

 

A car now represents more of an individual's purchase budget than ever before, they keep the cars longer, and the cars are cheaper to operate for longer than in the past. Increasing the finance term makes sense for the industry in this light.

 

Like everything there are upsides and downsides:

 

Upsides:

- you can buy a more expensive car than you would normally be able to afford in your monthly budget. This puts many new cars into the range of people who could normally only afford used cars.

 

- Most carry no prepayment penalty (or a first 2 years only prepayment penalty), so you can finance longer to get a low monthly and then overpay, knowing that if you have a temporary financial hardship in that month you can make the lower minimum payment for that month and divert the excess funds somewhere else.

 

- the interest rate is often comparable to shorter term loans, so if you are prepaying it the difference between this and a shorter loan is not that much different.

 

- it incentivizes people to keep their cars longer and to maintain better than average insurance coverage for longer as well.

 

Downsides:

 

- It can be more expensive if you go full term

 

- you can get trapped into a bad situation if the car ends up having a higher maintenance cost in that post warranty period.

 

- it creates a situation where the borrower is underwater in the loan for longer, increasing the chances that a financial hardship can effect them.

 

- it favors cars that retain their resale value like subarus, jeep wranglers, Toyota camrys, etc...and disincentives people to buy cars that have huge depreciation. Unfortunately a lot more of the cars with large deprecation are American so you could say it is an incentive to buy something other than a GM/Ford/Chrysler product.

 

- it transfers value from the consumer to the mfg/dealer/finance company. How so? in the old days (say the 1980's) a car lasted about 5 years before requiring significant and expensive maintenance, meaning that by the time the consumer was paid off, they were ready to buy another car. However, as cars got more reliable, the financing was running out but the consumer was keeping the car longer - meaning the dealer/mfg wasn't selling as many cars and they weren't getting paid on it. By extending the finance terms, the entity holding the note is receiving an interest amount for that longer period until the consumer needs another car - an amount that the consumer would normally be pocketing where they paid off their car in 5 years and kept it for 10. It is the mfg/dealer/finance company's best interest to keep you rolling over into a new product at the end of the old one, and any kind of gap in that is revenue they are not earning.

 

I am sure there are others people will add.

 

Anyway, just like everything else - there are situations where a longer term can be a benefit, and others where it will not, it's up to the consumer to know what's best for their situation.

[Rustlestiltskin]

Sounds like something Cordell would do

[Not Brian]

[Geeesammy]

Bought a CPO vehicle with loads of warranty time, best believe I financed that sumbitch for 6.5 years. Keeping it past full term and the rate was killer.

[SPL_Josh]

Car loans lol

[Zx2guy19]

Car loans lol

 

Working until you're 65 and praying for SSI lol

[Supplicium]

Is it possible to delete my account on here?

[Not Brian]

lolwat

[ShowHBK]

Eh, I see where this is coming from... and Carry makes a good point.

 

I normally don't speak up on things like this but I felt like I would give a young persons perspective on how I feel about this. I know this is the kitchen and I am prepared for any shit flung in my direction, but this is an **OPINION**

 

I am young (26) and posses a B.A. degree and I work a 9-5 job just like many folks around here do. I would like to own a nice car. Something fun, sporty, but practical. Factually speaking, many young people (like myself) are in debt up to our eye balls because of collage loans so paying for a $30,000+ (new) car is out of the question. Many of the cars I am looking at now are on the used market because buying new for someone in my situation is simply not possible. Even $20000+ cars are out of out reach in some cases. Stretching out a loan for people in this situation actually makes perfect sense because it places the car in your possession and leaves you money for gas, maintenance, and repairs for when things break. Yes, this drives the overall cost up over time... But many people that I know don't have the spare income to stash away vast amounts of money so its not all that bad. Considering many young people have rent, student loans, gas, utilities, and all the other things to pay for... why would you want to constantly worry about your car?

 

In short... I actually agree with Zx2guy19 on this one. I honestly would rather finance a car over a long period of time and pay a "little" more on the price to have something new, reliable, and fun for my daily commutes. Honestly... this just makes sense to me because I would not be able to afford a car without a system like this. Leasing has never been appealing to me because I don't want to give the car back in the event I really enjoy the car.

 

Just my two cents... I am interested to know what more people think

 

[iwashmycar]

I felt bad putting 72 months on the FJ I recently paid off. Its all good because I don't want to get rid of it at all, and its worth almost what I paid....now if it were some Dodge Ram or something with the bedsides starting to rust out Id be pissed.

 

Still couldn't imagine putting up for 84 or even 96 months lol. I guess if I reaaaaaaaly wanted a new 4Runner, and knew I would drive it for 10+ years, then I see the incentive of it coupled with a strict plan to actually keep the thing.

 

Hell a 4Runner is one of the best examples I can even think of to use a long term...it likely wont depreciate enough to screw you even if you are paying less per month. Still a chance you could get out at anytime.

[spectragod]

The longer car loans are a good way to get upside down if you are replacing something every 4 years or less (also a good way to throw away money if you are able to afford a shorter term loan). Another reason I love my wife, we just replaced her Durango with an Equinox recently. We paid cash for it and it was pretty cheap (05, 108k miles, out the door for 3k), of course it needed a couple things, but I have a good reliable vehicle for years to come for under 4k invested right now, which makes her happy.

 

My cars are paid for, with the exception of the wife's, she had misfortune with someone totaling out her last car, she rode the wave of 2 replacements, both new, both bought back by the dealer. Stuck her in my 13 f-150 for the last 2 years, -0- problems, she wanted a new Expedition, so I hope it's as dependable as the f-150.

 

I could have paid for it, I chose not to use up my rainy day fund for that, I'd rather make payments. She generally keeps cars forever, I have to pull her out of them. Me the other hand, I'm tired of them 6 months in....

Edited June 5, 2017 by spectragod
Spell check

[Geeesammy]

Working until you're 65 and praying for SSI lol

 

His daddy owns a car lot and gives him what he wants. Pay no mind.

[Bam]

'Murica!

 

Do they do this stuff overseas or is this just for the stupid Americans?

[Otis Nice]

*Brilliant video*

 

That was a brilliant video. Thank you for sharing.

 

I honestly would rather finance a car over a long period of time and pay a "little" more on the price to have something new, reliable, and fun for my daily commutes. Honestly... this just makes sense to me because I would not be able to afford a car without a system like this.

 

 

My first thought is, "new does not always guarantee MORE reliability." Yes, New Camry vs. 1994 rusted out civic that has been tatered to death, but not necessarily over a good quality used car. This statement seems pretty circumstantial IMHO.

 

Also, how can you afford to have a super expensive car with all the bells and whistles yet NOT be able to afford a very basic vehicle without the Nav and such? Or do you mean without the financial situation? Am I misunderstanding what system you're referring to?

 

IMO, if anyone NEEDS to finance ANYTHING for a longer amount of time than it was designed to last, they can't afford it. Find other means. That's just, like, my opinion man.

[ShowHBK]

That was a brilliant video. Thank you for sharing.

 

 

 

 

My first thought is, "new does not always guarantee MORE reliability." Yes, New Camry vs. 1994 rusted out civic that has been tatered to death, but not necessarily over a good quality used car. This statement seems pretty circumstantial IMHO.

 

Also, how can you afford to have a super expensive car with all the bells and whistles yet NOT be able to afford a very basic vehicle without the Nav and such? Or do you mean without the financial situation? Am I misunderstanding what system you're referring to?

 

IMO, if anyone NEEDS to finance ANYTHING for a longer amount of time than it was designed to last, they can't afford it. Find other means. That's just, like, my opinion man.

 

I typed 5 paragraphs explaining my point of view and felt it was not worth it in the end...

 

TL;DR... Cars a expensive... Stretching the payments out over a long time makes sense and works (for me) maybe not you. Buy a nice car that is easy to fix and buy parts for (domestic) and you are good to go in my eyes. meet me at cars and coffee to talk more sometime... I find CR not a good place to get a point across. :eyes:

[Otis Nice]

I typed 5 paragraphs explaining my point of view and felt it was not worth it in the end...

 

TL;DR... Cars a expensive... Stretching the payments out over a long time makes sense and works (for me) maybe not you. Buy a nice car that is easy to fix and buy parts for (domestic) and you are good to go in my eyes. meet me at cars and coffee to talk more sometime... I find CR not a good place to get a point across. :eyes:

 

Fair enough.

 

I get what you're saying. I use to do the same. Now I'd rather not have debt/payments. YMMV.

[TTQ B4U]

Buy used to avoid the initial hit in depreciation and finance as long as you want but IMO balance out paying it off earlier to avoid over-paying a smart amount of interest but don't pay it off too early as that equity just sitting in your garage or driveway exposed to daily driver damage isn't going to work for you just sitting there.

 

I financed my car mainly because the money was dirt cheap to borrow and I can by far make more with the principle in other vehicles besides one with four wheels. YMMV.

[Otis Nice]

His daddy owns a car lot and gives him what he wants. Pay no mind.

 

What I picture every time Grant talks about anyone inheriting anything, being born into anything, or generally just getting pissy that he doesn't have what someone else has: