Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I didn't overlook anything. My comment was based on a specific exchange between you and another poster where the other poster stated that you (meaning someone with an 8-year loan) would pay $30,000 and he would pay $25,000, and you - based on the statement in your reply - thought he was talking about the up front purchase price of the car. I just pointed out that he wasn't and illustrated the difference. It had nothing to do with any previous discussion whatsoever.
The interest rates themselves are irrelevant. Based on the table you posted:
3 years @1.49% on a $20,000 note = $568.41 x 36 mos = $20,462.76 total outlay
8 years @ 4.49% on a $20,000 note = $248.37 x 96 = $23,843.52 total outlay
Difference of $3,380.76, compared to $3,555.84 in my previous illustration. It tells the same story, the longer you finance, the more you'll pay, especially if the interest goes up with the repayment term.
I looked at the rates being offered at my credit union. They offer 4.49% for up to 96 months. That's a little high for my taste but not horrible. Given the rate table below, 72 months [on a new car] seems to be the best option. It'll be tough to do worse than that in the market.
Quote:
Originally Posted by duster1979
I didn't overlook anything. My comment was based on a specific exchange between you and another poster where the other poster stated that you (meaning someone with an 8-year loan) would pay $30,000 and he would pay $25,000, and you - based on the statement in your reply - thought he was talking about the up front purchase price of the car. I just pointed out that he wasn't and illustrated the difference. It had nothing to do with any previous discussion whatsoever.
The interest rates themselves are irrelevant. Based on the table you posted:
3 years @1.49% on a $20,000 note = $568.41 x 36 mos = $20,462.76 total outlay
8 years @ 4.49% on a $20,000 note = $248.37 x 96 = $23,843.52 total outlay
Difference of $3,380.76, compared to $3,555.84 in my previous illustration. It tells the same story, the longer you finance, the more you'll pay, especially if the interest goes up with the repayment term.
Per NJ's on post it is almost 4.49% for a very long loan versus 1.5% for a shorter term loan. That is a substantial amount of money paid for a longer term loan.
Why anyone would do this I'm not sure. There might be certain scenarios where I can see it, but going for the longer term loan your just paying more.
I own a small trucking company. A new truck is approximately $150,000 and the maximum loan length I can get is 6 years. Every mile this truck is running it is making income unlike the majority of privately owned vehicles. I finance them at 5 years.
I bought a new pickup 2 years ago for $48,000 and took out a 4 year loan on it to get a good interest rate. They were pushing me to extend it to 7 years so I could have more money in my pocket every month.
If I lost all my contracts tomorrow I could still payoff the pickup truck. Because I will not take out a loan on a personal vehicle I cannot payoff today. Learned that when I was young and bought more car then I could afford. The bank picked it up in the middle of the night. Never again.
If you have to pay for your personal vehicle for more than 5 years you are buying more than you can afford.
I didn't overlook anything. My comment was based on a specific exchange between you and another poster where the other poster stated that you (meaning someone with an 8-year loan) would pay $30,000 and he would pay $25,000, and you - based on the statement in your reply - thought he was talking about the up front purchase price of the car. I just pointed out that he wasn't and illustrated the difference. It had nothing to do with any previous discussion whatsoever.
Well, yes, he did.
Quote:
Originally Posted by Listener2307
And the car dealers know you think like that. So they jack up the price of the car, and pay the loan company for you - with your money.
if the interest rate is the same, you should always want to extend the term. the reason you finance isnt because you dont have the money; its because you have better things to do with the money than put it in a car.
I understand that from a financial point of view, but realistically, how many people who are taking out 6,7 and 8 year loans are doing it because they can take that money they would have spend up front and putting it in wise investments?
How many are buying too much car and wasting money they supposedly save on the lower monthly payments?
Would you bet most are taking the monthly savings and just wasting it on other nonsense?
These loans are just encouraging more people in the lower economic spectrum to spend more money they don't have.
I just did some quick calculations and while it's a bonehead financial move for most ppl, I can see this being a viable alternative to long-term or multi-term leasing, if you want to keep the same car for 5, 6 or 7 yrs. For example, based on NJBest's 4.99% APR the 7-yr loan payments on a BMW 320i (their new "base" 3-series sedan) with Premium Pkg and Navi would be $490/month, while leasing at the current rates would be $430/month. For that $60/month difference you get some equity in the car after the 4th yr or so depending on the depreciation schedule.
The point everyone is missing is who we're dealing with. Will the average American buy the car they could afford in the first place with this extended loan? Answer: No. The typical American consumer says "gee, with that lower monthly payment, I can now get a car costing $20k more than what I had originally planned on spending.". Therein lies the rub. Therein lies the lesson of America beginning from the 1980s.
too bad for the average american for not being smarter about their spending. i like the idea of lower interest rates and longer terms. i will take advantage of them in order to grow my net worth.
i dont want to develop an education curriculum for all grades, but i think education is failing to teach children some of the most important things to know. i think basic finance and money management should be there.
Last edited by CaptainNJ; 04-12-2013 at 07:52 PM..
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
