Many people are do not know that you can now get 72 month auto loans. Is that a good idea?
72 months. 6 years. It may seem like a long time, but for some people that are wanting a car and are trying to keep their budget in line this may work for them. A 6 year loan will typically have a higher rate than a 5 year, but a 3 year has a lower rate than a 5. Yet it seems that few actually take 3 year loans. Why is that? It comes down to the amount of affordability that surrounds the monthly payments. A 5 years loan will cost loss every month in payments. And so in getting the 5 year loan that car owner convinces themselves that they had afford a more expensive car.
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Should I consider 72 month auto loans?
With the vehicle, it hinges on what what you are considering doing with it. As in how long you plan on keeping it. Many people trade in their car after 3 years so a 72 month auto loan would not work for them and it would be costly to trade and well as being expensive as the loan would need to be refinanced. Then again, if you are the type of person that wants to keep the vehicles for 5 or more years then a 6 years loan would be a more affordable consideration.
What are the downfalls?
The longer the loan is, then the longer it takes to pay it off and you run into the risk of owing more on the car than what it is worth. You also will generally pay a higher interest rate that 60 months. However, if you do intend to keep your vehicle for more than 6 years, and the 0 a month makes that big of a difference to your monthly budget, then you can take the 72 month option.
And while you may pay less money each month, more of each payment consists of interest rather than the principal. So while you're paying more interest each month, you are also paying back less of the loan principal. Because of this you run the chance that your loan will become "upside down" -- you could end up owing more on the vehicle than it's worth.
You can however contribute more than the minimum monthly amount that is due to reduce the finance charges, as your situation changes - it always does when we are talking about such a long period of time. Doing this would mean that you are not restricted to the full 72 months in payments.
Before considering whether to apply for 72 month auto loans be sure to read the fine print, especially about the fees and charges. You will need to weigh up all the options before you decide if this is the best route for you.
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