When I bought my first car at 19, I was given a 60-month term on my loan. It always seemed like the ‘normal’ length of time to finance a car, and the first time someone mentioned to me that they’d financed their car for 72 or even 84 months, I was shocked. I never keep a vehicle for the full five years on my own loan, let alone one for six or even seven years. That is just insane to me, especially when you consider that most people don’t put money down and are upside down for most of their car loan.
Financing a vehicle this long is a bad move, and we are going to tell you why you’d rather just pay more now than pay less for longer. Pay attention, we’re saving you money and hassle here.
You Cannot Afford The Car
Let’s just be honest here, if you have to finance a vehicle for 84 months to afford it you cannot actually afford it. Just like if you cannot afford to put anything down or pay cash, you cannot afford. How about buying a car you can finance for the shortest amount of time allowed and still have an affordable payment? That’s a car you can afford.
It’s Not Saving
Sure, if you want to drive a Cadillac Escalade, it’s going to be far cheaper for you to drive it for 84 months at a lower monthly payment, but you’re actually paying more than you are if you just finance it for 36 months or even 48 months. You’re paying more interest, less principal and you’re paying a lot more.
You Won’t Drive it That Long
Let’s say you trade your car in every 3 years. Most people have another year or two left on their loan at that point and their car won’t be so upside down, or it might even be worth more than they owe. If you still have another four years to pay on that thing, you are going to either be very upside down and you are going to add thousands to the price of a new car, or you are going to have to come out of pocket.
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