Few people can pay cash when looking to buying their dream cars. Thus, loan providers are often approached. When a car buyer walks into a dealer and needs financing, the dealer may be able to help given their relationships with specialty financing companies such as Consumer Portfolio Services. But result of rising car prices is the increase in the length of car loans by consumers. The reason some car dealerships and car loan companies are doing this is because they want to help more people be able to afford a car. However, some personal finance experts are not okay with this practice because it could be costly for car buyers in the long run unless the buyers are financially responsible.
Car Buyers Pay More Interest As A Result
Another reason why some personal finance experts say that it is not a good idea to take out a longer car loan is because of the higher interest rates that car buyers would pay in addition to the monthly payment on the car. They also say that if a car buyer loses his job and can no longer pay on the car loan, it will put him in a lot of debt.
How Are Car Loan Lengths Determined?
On average lenders of car loans offer loans that can last between three and six years and the car buyer can make between 24 and 72 payments during the term of the loan. If you are buying a new car, you will have between 60 and 72 months to make monthly payments depending on the price of the car. Some car dealerships may offer discounts and 0% interest until a certain number of months have passed from the date of the purchase. If you buy a used car, the car loan length is determined by the age of the car.
How Longer Car Loans Help Car Dealerships
One benefit of having a longer car loan means that car salespersons can sell more cars and they can offer the opportunity to give longer car loans as way to increase sales for the dealership. However, the negative side to this is that car buyers may come across a shady car salesperson who will quickly offer a longer car loan and not try to help the buyer get what he can afford.
Car loans are very good if you cannot pay cash. While there is nothing wrong with getting a longer car loan if you can afford the monthly payments, not all people should make this decision because if they do not have permanent or stable employment. Another disadvantage of getting a longer car loan is that you pay higher interest rates on the loan. Before you purchase a car you should look at your income and determine how much you can afford. Once you do this you should compare prices at different dealerships and choose the car that best suits your budget. Finally, negotiate for a feasible car loan that you can pay off in at least three years.