Fixed or variable rate on car loan?

**kork13** · 09-01-2010, 04:29 AM

How much is the loan for? Can you manage to pay for the car in cash? That would keep 100% of the potential interest payments in your pocket.

How long are you planning to keep the loan? For $30/mo to save you $2600, you must be financing for a VERY long time (7 years??). We can probably expect rates to stay fairly low for the next year or so, but beyond that time frame, it really starts to be a coin toss.

Personally, if I had to make the choice, I'd do the fixed loan. The word "variable" to me means "it's gonna get worse for me over time". Sure, a bit heavy into Murphy's law, but I'd rather not put it to chance.

**cruzmisl** · 09-01-2010, 04:45 AM

The loan is for just over 20k over 70 months just because it makes it very affordable payment wise. I need to devote my extra cash to cc payoffs.

The salesman is pushing fixed because I think they get a cut.

**kork13** · 09-01-2010, 05:41 AM

How much credit card debt do you have? Not to sound like a nagging mother or something, but if you have to finance a car for nearly 6 years in order for it to be 'affordable', you really can't afford it. Why not get a much less expensive used car? You can get some really good cars for between $5k-$10k, then you won't be bogged down with nearly as much debt. If you want to get your credit cards paid off, get them paid off! Buying a car you can't afford right now isn't going to help you at all. Besides, no matter what rate you get, to finance over 6 years, you're paying a huge amount in interest -- by the time you pay it off, you will have paid an additional $3700-$4000 in interest ALONE! That's about 20% of the cost of your car! Will you even have the car for 6 years? No kidding the dealer gets a cut, and he's taking you for all you're worth by dragging it out over 6 years! That's alot of gambling, and not simply with interest rates rising.

I know I'm just some random guy on the internet, but I really, strongly recommend that you reconsider both your car purchase and the financing you're looking at. That money could be far better spent paying down your credit card debt.

**cruzmisl** · 09-01-2010, 06:22 AM

I hear what you're saying but I need a reliable car that is good on gas. I don't plan on making minimums for the loan and will likely have it paid in two years if all goes well three at the most. Cc should be paid off by March 2011.

**snshijuptr** · 09-01-2010, 06:37 AM

Try a lightly used car. I'm looking right now and you can buy an 08 Honda Fit for 15k. My husband has driven the heck out of his 08 Fit and its still going strong, I have even seen used cars from 09 on the lots. Even one of these will save you thousands of dollars. See if you can get financing througha credit union or a bank before you go shopping.

**littleroc02us** · 09-01-2010, 06:38 AM

Originally posted by cruzmisl View Post

I hear what you're saying but I need a reliable car that is good on gas. I don't plan on making minimums for the loan and will likely have it paid in two years if all goes well three at the most. Cc should be paid off by March 2011.

You say reliable car. I bought a used Mitsubishi Galant 2007 last year that had 49k/30 mpg for 10k. It has been excellent and I don't have any payments on it. Buying a new car is a complete waste of money due to the 60% depreciation your going to take on it in around 5 years. My car has already depreciated over 50% and I won't lose as much as you will in this bad deal. Plus I think it is totally irresponsible for you to be buying a toy when you have cc debt. Get real.

**cruzmisl** · 09-01-2010, 06:48 AM

Originally posted by littleroc02us View Post

You say reliable car. I bought a used Mitsubishi Galant 2007 last year that had 49k/30 mpg for 10k. It has been excellent and I don't have any payments on it. Buying a new car is a complete waste of money due to the 60% depreciation your going to take on it in around 5 years. My car has already depreciated over 50% and I won't lose as much as you will in this bad deal. Plus I think it is totally irresponsible for you to be buying a toy when you have cc debt. Get real.

Whoa take it easy. I realize a used car is the best deal but I'm not paying 12% interest on a used car loan.

With all due respect I just really want to know fixed or variable?

**nmboone** · 09-05-2010, 05:40 PM

Go with variable. If you think you will save money with it then go for it. But remember, 6 years is a long time and that variable rate could go anywhere.

Also, don't take the other posters lightly, they had some great advice.

**littleroc02us** · 09-07-2010, 05:32 AM

If you have to finance a car you cannot afford it. My two cents.

**Debt Relief** · 09-08-2010, 06:11 PM

Interest rates right now are VERY low. You have to weigh the likelihood that they will go up and how soon against the rates you're being offered.

If you "really" think the car will be paid off in two, maybe three years and you don't think rates are going up much in that period then an adjustable rate would likely be best.

If you think you may take 6 years to pay it off then the likelihood that rates will go up substantially during the life of the loan goes up substantially and the fixed rate begins looking better and better.

I have a 10 year old Honda Civic EX and 11 year old Honda CRV. Up until last Dec I was making between $130-140K. Then I got laid off. Luckily I had no credit card debt, no car payment... only a house payment... and I had enough money saved that was liquid to live off of for the next year and half.

You may want to consider a "good" used car as others have suggested. While you may have a job today, you never know what might happen next week or month. I had worked for my company for 9.5yrs and BLAM! no job. Plan for the unexpected.

Fixed or variable rate on car loan?