Take a long look before you sign up for an extra long auto loan
With a squeeze on credit today, many car dealers are trying to get customers to bite, by offering them loans of up to 84 months, using lower monthly payments as bait. The rule of thumb for anyone looking to buy an auto should be-if you can’t pay off a car in 60 months, you can’t afford it any way. Having a car loan drag on for six to seven years can be nothing less than a financial nightmare.
Longer loans attract higher interest rates and over a longer period, you’ll be paying a higher rate. By the time the car is paid off, you would have paid a lot of money in interest, which is not tax deductible, therefore of no real benefit to you.
Your new car or truck will lose 20% to 30% within a year of rolling out of the dealer showroom. With a 60-month loan, you will owe more than what your car is worth, after two years. But with an 84-month loan, you will still owe the same in the 6th or seventh year of pay-back time. And what can you realistically hope to get when you trade your car in finally?