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Wouldn't it be even more affordable to save up for the next 7 years and pay cash for the car? You would not even have to save for 7 years. Chances are you could save for 4 or 5 years and pay cash.
Quote:
Originally Posted by ss20ts
What are you going to drive in the mean time?
Yea, I will ask the same; what will you drive in the mean time?
Who wants to make that many payments? If you can't get the car paid off in 36-mos., you are looking at too much car.
I have a car loan that is at 1.99%. I would choose to take that over 180 months if I could- with an interest rate that low, it will ALWAYS be better to keep the loan outstanding and put the money I would have used to pay the car off into an S&P 500 mutual fund.
Then how do you save money for years to buy a car? Most people in this country don't live where there is reliable public transportation.....it's not free either. Yeah yeah yeah they should move to where there is reliable public transportation....far easier said than done! Oh and that takes even more money!
Loans of over 4 years are CRIMINAL - all they do is encourage people to buy way too much car.
If we are going to make something criminal let's start with stupidity and lack of common sense. If we could outlaw that, it would be amazing how fast these car dealers, pay day lenders, etc.. go bye bye.
This is nothing new. Subprime car loans have been around as long as car loans have. Sonny Corleone talked about it at the dinner table in the Godfather.
Huge difference. It only really goes wrong for the customer. The really subprime deals get sold for what the car is owned for. Every payment is profit.
It isn't the same as the guy with a 750 Credit score who bites off more car than he should on too long a note. That is a bad decision for the consumer but the bank will get paid.
A car is a critical item. It's one of the first bills people will pay.
I think those Liberty Auto Insurance commercials for "new/better car replacement" are a direct result of this trend.
Every time that lady says, "What do they expect us to do, drive around in half a car?" I want to say, "No, we expect you to get better financing!" (so you're not so far upside down all the time).
New car replacement wouldn't cover most of these cars. Too many miles and they aren't the first owner of the vehicle.
If someone is paying 19% interest on a car loan, then that says one of two things: Either they have financed the car on a credit card, or their credit score is horrible.
If we're talking about more car than one should purchase, then consider this: a $40k vehicle at 19% for 7 years is going to cost you $885/month. For some, that's a monthly mortgage payment. Some were talking about the $60k vehicles, they would cost you over $1,328/month! By the end of that car loan, you will have paid $106,240 on that $60k vehicle that by year 7, is worth about $25k. Let that sink in. You could have almost purchased two of those $60k vehicles. You could have almost purchased 3 of the $40k vehicles!
In a more normal scenario, chances are you're making a loan based on 4.5% interest. I know some get a smaller interest rate than that, but if you're looking at longer than 60 months, the interest rate normally goes up. So let's say you can afford the payments on a $40k vehicle for 7 years at around $580/month. You're justification is that it's brand new, so it's going to be dependable for years to come, you aren't inheriting someone else's problems, and you'll treat the car like gold, so your repair bills will be minimal. By the end of that term, you will have paid around $6,400 in interest. That $40k vehicle cost you $46,400 by year 7, and it's worth about $15k - $20k.
However, if you took that $580/month, and saved it for a year, you will have almost $7k. You can find a decent, dependable car for $7k. It could serve as your "right now" car until you were able to save up $20k to buy what was a $40k vehicle. It would take you about 3 years to save it up. If that $40k vehicle is not dependable after year 7, then you shouldn't be purchasing it in the first place, even brand new.
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Most people in this country don't live where there is reliable public transportation.....it's not free either. Yeah yeah yeah they should move to where there is reliable public transportation....far easier said than done! Oh and that takes even more money!
