The trend towards longer car loans means that some consumers can qualify for financing up to 96 months or eight years if they wish. According to Experian for the start of 2019, the average loan term for new vehicles is almost 69 months and for used vehicles is 65 months. Rising car prices and consumer preferences for SUVs Large and expensive SUVs have contributed to and increased this trend. The term of the loan is an effective way to get an affordable monthly payment. A low car payment is always attractive, but not always the best financial step. A longer loan generally results in higher financing costs and higher total purchase costs.
Imagine someone applying for a loan of $20,137, the average amount of a used car, says Experian, for 60 months at an interest rate of six percent. Your monthly payment is $389 and you pay $3,221 in interest at the end of the contract. He extended the loan to 84 months and the car payment fell to $294, but the total amount of interest was $4,573. $1,352 additional.There are other reasons to pay attention to long funding periods. Longer loans usually have higher interest rates than shorter loans. The negative capital risk is also higher if you owe more than the vehicle is worth.
For example, with an 84- or 96-month loan, you can still make payments for an old, high-mileage vehicle that has lost much of its value. Since the average lifespan of a new vehicle is almost seven years, you can change cars without enjoying debt-free driving or the obstacle of backing up. Longer car loans, however, have a place for some buyers and maybe the best option for hitting the road with an essential vehicle. When it comes to your own financing needs. Adjust the loan term, interest rate and monthly payment to see how the proposed financing changes.
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