Would you take out an 84-month car loan?

[creditcardfree]

out of curiosity I looked up auto loan rates at my credit union...

new/used

0-36 months is 2.24%
37-60 months is 3.24%
61-84 months is 3.74%

and.... drumroll please..

85-120 months is 8.49%

Yep, just as I expected. The longer the lender loans the money the more they want to be compensated for the risk they are taking on. So yes, I would pick 0-36 months if I couldn't pay the car in full.

[TexasHusker]

I have a general rule that if I can borrow money for 5 percent or less APR, I'll borrow it for as long as they will lend it. But that is limited to appreciating assets, not cars and toys.

A new car is quite often worth half or less what you paid after just 3 to 4 years. If you borrow for 84 months, then you are going to be upside down on that loan (owe more than the car is worth), for quite a long time. That is an uneasy feeling to me personally.

Leasing cars is cheaper for me. I used to trade all the time. Leasing protects me from myself, as I am more or less forced to keep the car for the term (36 months), but I am rewarded at the end of the term with a shiny new car!

Leasing is DUMB financially - it's just something that I can afford - at least right now - so I do it. Sort of like a salt water aquarium.

[disneysteve]

Are there actually car loans like this? It seems the risk to the lender is higher the longer they loan the money thus they would want to be compensated with a higher rate.

I'm sure it partly depends on the lender and the credit worthiness of the borrower. When I bought my car, the rate was 2.9% whether I signed on for 36 or 48 or 60 or 72 months. It didn't matter. Keep in mind that I have perfect credit, as in literally perfect - an 850 FICO score - so that may have had something to do with it. Others may not have been presented with the same offer.

[JoeP]

Let's face it: a lot of these long loans target those who need/want a car, cannot afford to pay with cash, and can only scrape together $140/mo. With job security being what it is, what happens when someone loses their job, especially over those 84 months? The lenders do this because there is a demographic that can support this business model.

[~bs]

for a ultra low/no interest deal, I would.

[disneysteve]

Let's face it: a lot of these long loans target those who need/want a car, cannot afford to pay with cash, and can only scrape together $140/mo

Not only that but also all the people who want what they want whether they can afford it or not. They want the $40,000 car, not the $20,000 car they should be buying, so instead of financing over 3 years, as recommended, they stretch it out over 6 or 7 to make it work. Or increasingly they lease instead of buy to keep the payments even lower.

[Benderz]

I purchase 4 or 5 year old used cars and pay in full. Other than my first car out of college i've never had a car payment.

[Smallsteps]

Let's face it: a lot of these long loans target those who need/want a car, cannot afford to pay with cash, and can only scrape together $140/mo. With job security being what it is, what happens when someone loses their job, especially over those 84 months? The lenders do this because there is a demographic that can support this business model.

I think most everyone on THIS forum can see the big picture.......... however there is a HUGE market for cars/ gadgets and other items that many people who are willing to tie themselves to payments for a LONG time to have what they want NOW regardless of if they can truly afford it.

[Fishindude77]

May as well get a shiny new bass boat on 120 month term to pull behind it too

[disneysteve]

May as well get a shiny new bass boat on 120 month term to pull behind it too

As long as you can "afford" the monthly payments.

[Thrif-t]

Heck no! I hate payments too! I routinely pay off things that are 6 mos same as cash early just because I don't want the hassle of payments.

Our last few cars have been bought for cash and I'm trying to remember when we made our last car payment on the cars before that..mmm, maybe since 05 we haven't had any car payments. I hope I can keep it that way.

But if I had to get a loan 36 months is it for me.

[Gailete]

No way would I finance a car for 7 years! That is insane. We usually don't even put 4000 miles on our car in a year. At this point it is 12 years old and we bought it when the odometer was reading in the 60K range. I t is only at around 81500 now. I don't remember the interest rate, but I got it paid off 6 months early and was thrilled. With a 7 year payment plan, I doubt if I would have gotten it paid off as soon.

I think a lot of folks have very poor math skills so they don't understand that a 36 month loan is 3 years and a 60 month loan is 5 years, etc. Nor can they figure out how much all of this will cost them. And the same for any credit item. Still remember talking to a fellow nurse one night and she just didn't understand that even though she had been making payments monthly on her couch, a year later she still owed as much as the sale price was. But then I think she had a bit of a short circuit as she was pregnant with her boyfriends baby and got mad when she found out he was 'cheating on her' and his wife was also pregnant!

[TrueMaroonGrind]

I recently took out a loan on a car myself (and have no regrets about it, I love the car)... Determining the loan term was difficult for me though. How long did I [I]really[I] want to pay on a car?

Now they are starting 84 month terms....

What do you think about that? Would you take out an 84 month auto loan?

I would never do that. My goal is after we get out of student loan debt to pay for every car in cash only. I think we will have to take out a loan on our next car, but after that we should never have a car loan again.

When we take out this car loan, it will be 36 months unless there is some crazy incentive(lower interest, free money... etc) to drag it out longer. Even if we did go longer than 36 months, I would just pay it off in 36 months anyways.

[disneysteve]

No way would I finance a car for 7 years!

Don't forget that taking a 7-year loan doesn't mean you have to take 7 years to repay it. As I said, I took out a 6-year loan for my car and paid it off in 12 months. We took out a 6-year loan for my wife's car and paid it off in 36 months. The length of the loan was irrelevant. Heck my student loans had a 25-year term and I paid them off in 12. It doesn't matter how long the loan is. All that matters is how quickly you repay it.

[Thrif-t]

Sometimes you have to watch with paying a loan off before the term that there aren't any fee's.

We had a home equity loan one time we used for a car. I couldn't pay it off early until 6 mos before it would've been done anyway or pay the fee....maybe that's just home equity loans? Just ask to be safe, or read the fine print.