5 Reasons to Refuse a 72-Month and 84-Month Car Loan
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- Published date: May 18, 2021
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- Adelanto, California, United States
Longer loan terms may seem good, but they have higher interest costs and can expose you to other financial problems, such as owing more than your car is worth.
You're confident about the hot new sports car, but the monthly payments on your car loan aren't meeting your budget. The drummer sighed sympathetically and then said, "I have an idea how to make this work."
He recommends extending your car loan to 72 or 84 months. He explains that your upfront payment will remain the same, but your monthly payment is lower. As he talks, you start imagining the coupe in the garage and show it to your friends.
But wait! Stop daydreaming. Oren Weintraub, president of Car Buying Concierge at AuthorityAuto.com, says that long-term car loan terms put you in a "vicious cycle of negative equity."
If you want to know where your car loan stands, check out the auto loan calculator at the end of this article. Doing so may even convince you that refinancing a car loan would be a good idea. But first, here are some statistics to show you why 72-month and 84-month car deals and loans can rob you of financial stability and waste your money.
Shocking car buying statistics
Car deals and loans over 60 months are not the best way to finance cars because, on the one hand, they have higher interest rates on car deals and loans. In the first quarter of 2019, 38% of new car buyers had 61 - to 72-month loans, according to Experian. Even more striking, Experian's data shows that 32% of car buyers have signed up for car deals and loans of 73 to 84 months - equivalent to six to seven years.
"To close a deal, [car dealers] need to provide comfortable payment options," Weintraub said. "Instead of reducing the sale price of the car, they offered a loan." But, he adds, most dealers may not disclose how to change rates and cause other long-term financial problems for buyers.
Used car financing follows a similar pattern, with potentially worse results. Experian revealed that 42.1 per cent of used-car shoppers are taking out car deals and loans of 61 to 72 months, while 20 per cent of consumers are taking longer, with financing taking 73 to 84 months.
If you buy a three-year-old car and get an 84-month loan, it will take 10 years to pay off the loan. Imagine how it would feel to pay off a mortgage on the back of a battered 10-year history.
Long term loan terms are another tool for dealers to bring you into the car because they focus your attention on the monthly payment rather than the total fee. But just because you qualify for these long-term car deals and loans doesn't mean you should take them.
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