How You Can Score the Best Long-Term Deal on a Car Loan
When you see that TV commercial for that brand new vehicle whether it’s a super duty pickup truck or a slick-driving sports car, you’re probably eager to hit the dealership and test drive it. If you like it, you’re probably quick to see what kind of financing you qualify for so you can have that car to drive every day.
But one thing you have to be aware of is the length of the financing term, and just because you can get long-term financing that entails low monthly payments doesn’t mean that that’s the best thing to do. Here’s a few things to know about getting a long-term deal.
How Long Do You Plan To Own The Vehicle?
An important factor in getting a long-term car loan is whether or not you’ll be planning to use the vehicle for a long time. If you’re someone who likes to buy cars that you take good care of and try to keep running for over 10 years, a typical long-term loan might not be bad for you.
If you’re someone who needs the fresh in new vehicles often, you may want to limit just how long your long-term loan is.
How Much Will You Be Paying Over That Period vs the Vehicle’s Depreciation?
You have to remember that vehicles are always going to depreciate and that in about 4 years they could lose about half of their value, and that’s not even including an accident which could really drop the value.
To get a rough idea of what you’re looking at for a car’s value down the road, a car value calculator can help you plan accordingly. The main reason you want that value to stay relatively high such as around $10,000 is so that when you pay off your vehicle loan, you might be able to sell it and use that money as down payment on a newer vehicle.
Down Payments and Interest Are the Keys
The longer your loan goes, the more your interest will add up. Because of the depreciation factor, you ideally want to get a long-term loan that lasts about maybe 4–6 years at the most as opposed to 8–10 years because as low as your monthly payments start, you could end up paying more than you should in the long run.
One of the best ways to make sure you won’t have to refinance your long-term loan is to have a large down payment, perhaps even exceeding what the dealer asks. You can also work with companies like AutoStart for additional payment help.
In conclusion, a good long-term car loan goes beyond simply what you can afford to knowing where you’ll be several years down the road. A long-term deal is probably a great option for those who plan on using the vehicle lightly and can keep its value high for years, but probably not good for those who travel a lot or use the vehicle for heavy work.
You also should always shop around for low interest loans instead of settling on the first one you’re given.
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Category: Loans
