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I'd never stretch out the financing that far on a strictly depreciating asset. Better off just leasing and let the finance companies assume the risk of letting you drive around in it. I honestly don't know why I'd ever traditionally finance a car again. Either lease or pay cash IMO.
Leasing is throwing money away. Cash is the way to go.
You aren't paying attention to the charts I posted. Look at the one I just posted today (a couple posts up). Longer term at higher rate creates a better loan opportunity for you. If you consider the S&P500 average return, you're giving up a loan opportunity of $2500.
While I understand the point you have been making and it does make some financial sense, the main reason I started this thread is my belief that vast majority of people getting these long term car loans aren't doing it to divert the monthly savings to other investments or wise financial decisions. They are doing it to allow them to drive a more expensive car and take the monthly savings and spend on other depreciating assets getting themselves in deeper long term debt.
Also, how many of these people with 7 year loans or longer are going to actually drive the car to the end of the loan? In effect, many more people will never actually fully own the car before they trade it in and start the whole process all over again.
While I understand the point you have been making and it does make some financial sense, the main reason I started this thread is my belief that vast majority of people getting these long term car loans aren't doing it to divert the monthly savings to other investments or wise financial decisions. They are doing it to allow them to drive a more expensive car and take the monthly savings and spend on other depreciating assets getting themselves in deeper long term debt.
While I understand the point you have been making and it does make some financial sense, the main reason I started this thread is my belief that vast majority of people getting these long term car loans aren't doing it to divert the monthly savings to other investments or wise financial decisions. They are doing it to allow them to drive a more expensive car and take the monthly savings and spend on other depreciating assets getting themselves in deeper long term debt.
Also, how many of these people with 7 year loans or longer are going to actually drive the car to the end of the loan? In effect, many more people will never actually fully own the car before they trade it in and start the whole process all over again.
That's your belief and if some people are using these loans (or any other) to make irresponsible financial choices, then that's not so smart.
There are lots of responsible people out there for whom a longer term loan could make sense which is what many of the posters have been pointing out.
I would be interested in seeing info on how many people use longer term car loans, or leases, or whatever to "spend more than they can afford" vs. those who use them more thoughtfully.
Financial tools (e.g. loans) are like any other tool. Use them wisely they can be very useful and helpful, use them stupidly you can hurt yourself and others.
If someone wants to take out a 9 year loan to buy a car, that's on them.
Personally I think it's foolish and I wouldn't do it, but I had a 5 year loan on my car and some people...people with 3 year loans or people who buy cars with cash...might think that's foolish too.
While I understand the point you have been making and it does make some financial sense, the main reason I started this thread is my belief that vast majority of people getting these long term car loans aren't doing it to divert the monthly savings to other investments or wise financial decisions. They are doing it to allow them to drive a more expensive car and take the monthly savings and spend on other depreciating assets getting themselves in deeper long term debt.
Also, how many of these people with 7 year loans or longer are going to actually drive the car to the end of the loan? In effect, many more people will never actually fully own the car before they trade it in and start the whole process all over again.
Probably many.
Average new car buyers hold their car for about six years. Intuitively, I would say people taking on longer loans are more likely to hold for a longer period. The average gets brought down by the serial new car buyer who gets bored and buys something new every 2-3 years. Of course, they also could be doing 7-year loans.
Your probably right about that, but unfortunately you sometimes have to deal with the devil to live. Most people have to take on debt to buy a house. While it's certainly true you can rent your entire life, it's a statical fact that people who buy have a greater net worth than people who rent. Rents always increase, but when you buy, you basically locking in your rent for the next 30 years. It takes anywhere from 7 to 15 years for rents to increase to a point where the renter is paying more than the home owner.
While I understand the point you have been making and it does make some financial sense, the main reason I started this thread is my belief that vast majority of people getting these long term car loans aren't doing it to divert the monthly savings to other investments or wise financial decisions. They are doing it to allow them to drive a more expensive car and take the monthly savings and spend on other depreciating assets getting themselves in deeper long term debt.
Also, how many of these people with 7 year loans or longer are going to actually drive the car to the end of the loan? In effect, many more people will never actually fully own the car before they trade it in and start the whole process all over again.
Agree 100%, I have no doubt that there are people who are using this longer loan term to invest in other places, I would guess that most use it to buy more car than they can afford and using the longer term to stretch the payment to fit into their budget. Also don't underestimate the increase in the average car cost due to the availability of loans that allow people to afford more car by stretching out the loan term.
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