I was interested to read what my provincial government thinks of these new 7 and 8 year car loan options.
Buying a new car? Why long term financing may not be a good idea.Jan 22, 2015 04:31 pm
When financing the purchase of a new vehicle consumers often focus on only one thing: the amount of each payment. Making sure the payment fits into your budget is certainly an important piece of the puzzle, but its not the only thing you should consider. Here are four questions to ask yourself when financing a vehicle:
How much does the car really cost?
Walking into a dealership with an idea of what you can afford per month is good. But to make an informed decision, you need to know what the grand total will come to after all taxes, fees and financing charges are included.
Not only will you have to pay for the cost of the vehicle (including taxes, freight, and other fees) you will also be paying interest on your loan and may need to pay other finance charges. Dont be swayed by the sticker price or a low monthly, bi-weekly, or weekly payment amount. Before deciding to finance your vehicle make sure you understand and are comfortable with the total cost of the vehicle. For more information about the cost of borrowing check out the Credit & Collections section of our website!
How long will I take to pay back the loan?
Consumers now have the option to finance a vehicle with terms of up to 8 years. It may seem like an attractive option to stretch your loan in order to lower the individual payment amount, but you may end up hurting your bank account in the long run. It is a universal truth that the minute you drive a car off the sales lot it will be worth less than what you paid. Because vehicles depreciate quickly, they may not hold their value throughout the life of a long-term loan. If you want to sell your vehicle before the loan has been paid it is likely that you would be selling it for less than what you owe on it. You also need to consider the life span of the vehicle. Generally, the older a vehicle gets the more you can expect to pay for maintenance and repairs. If you finance a vehicle over a long term you may end up paying for costly repairs while you are still making monthly payments. [CLICK HERE FOR FULL ARTICLE]