xxh

It would practically make my car payments dirt cheap if they do. Do they?

kodawg9

I've personally never heard of any car offering 10 year financing. I've seen 72 months before, but not 10 years.

But regardless, I would highly suggest you don't finance a car for over 6 years. First off, unless your plan is to be driving the car for a real long time, it doesn't make much sense.

You're also going to have to consider the value of the car 10 years down the road, when you're just about to finish paying off the car. Let's say you're 8 years through with the car--if you're still driving it. You may still have monthly payments to make on the car. You may be paying more than the value of the car at that point in time.

Obviously, you could pay it off before the financing expires, once you start earning a higher income, but just realize that you're dealing with a depreciating asset while the costs based on value jump up over those years.

Sure, in the short run, 10 year financing will keep costs low (if that even exists--I think that's a matter of the specific dealer). But you're adding extra payments on the loan. IF an Acura dealer gives a 10 year loan, the interest rate is going to be significantly high.

But again, I really don't think most dealers offer a 10 yr option. 60 or 72 months is what dealers typically set.

samnguyen

Never heard of any 10 yrs financing, but if they do it's gonna be a long time to pay off for a car man.

grammy

dont do it...

tsxdriver

if you can't handle the payments, get a different car. 10 year financing... geez...

jchan2

Maybe I am a little conservative when it comes to financials, but anything longer than 36 months on a car loan is not the wisest move.

On a new car with stellar resale, 48 months might be ok. But otherwise you are simply going to be upside down for a while and that is not an enviable position to be in.

kodawg9

This.

When I bought my first car back when I was in HS, I would've loved something nice, but I had a budget of 9K so I went and got a 10 year old 3 series with 80k miles. It was alright and all, but while it would've been nice to own a newer, more unique car than my peers at 16-17 years old, it didn't make sense financially to reach out and go after a $15k car.

I would love to get an AMG but I would never go finance a car for 10 years.

Jimmy The Saint

10 year financing = you cant afford the car

GWEEDOspeedo

True, and that's how auto-finance companies would probably view it.

Ten year auto loans would make a lost of interest to finance companies, but the reward is offset by exponentially-higher risk than 5-6yr loans.

Itchytoe

The most you can possibly afford for a vehicle is half of your yearly income financed over 6 years. If you have to finance longer than that, or more money than that, you just can't afford it and should look elsewhere. 10 years is a short term home loan, it's not a vehicle loan. 1,500 a month for 10 years is what? 150,000 home loan?

Extending a loan's life doesn't reduce payments indefinitely. No matter how you do it, you have to pay more than the interest that acrues in that first month or you will never pay off the loan, it'll just keep getting bigger and bigger. If you finance 20,000 for 5 years you get a monthly payment of $377 (assuming 5% interest). Paying it out over 10 years puts you paying $212 per month. You save money right? No you don't. You actually end up paying $2,810 more for the 10 year loan. And you're paying for it twice as long. If a company is dumb enough to offer you a 10 year car loan, run from them screaming like a little schoolgirl because that company is going to go backrupt before you pay off the loan.



*all payment related data was obtained from Microsoft Excel's =PMT function*

GWEEDOspeedo

Well, 'should' and 'can' afford are subjective. Realistically, a car is a means of transportation and should cost enough to be reliable and get you from A to B with a stop at C for some 'hunnies'. If one wants to buy a more expensive car, one needs to budget accordingly. You're absolutely right that longer loans (at the same rate and principal) cost more to the signer, but they're structured to amortize within the life of the loan so the person doesn't need to worry about paying enough to 'pay more than accruing interest'.

I work for a personal finance company and we do more-risky lending than most lenders because, when it comes down to it, we're able to collect well. We will sometimes make 7yr auto loans but we make the interest rate higher to accommodate for the additional risk of extending the life of the loan. In the end, the person may have a little lower of a payment, but we're making nice interest. Of course, they have to pay to get that interest

Jimmy The Saint

If somebody needs a 10 year loan so they can purchase a depreciating asset, that means they can't afford it. It's that simple. When this person has pays off the car it will be worth almost nothing and he will have paid probably double the price. Moreover, its puts him in a serious financial bind should he ever have to sell the car. He will always owe way more that the car is worth, and if he decides to trade it makes it even worse by financing negative equity. Its obvious this guy should be looking at a 4 or 5 year old civic or something.

GWEEDOspeedo

People are certainly welcome to put themselves in poor financial situations if they want to; it happens all the time. I didn't promote his decision to find a 10yr loan; I only discussed it.

There's certainly an argument for longer loans for people who intend on keeping it for the life of the loan. Why should they have to pay it off early if they want to keep it longer than the loan? Why couldn't they pay it over the course of ownership? It's like buying a house with a 30yr mortgage. Why do people get 30yr mortgages? Because houses are f***in expensive and most people can't pay over just 10-15yrs. But, why do banks endorse 30yr mortgages? Because the house isn't going anywhere, unlike a car which could be bought in Maine and drive to Mexico on the next day. It's possible the bank never gets another payment and can't find the car or the person. If it was much easier to track where cars are at a given time, I would bet we could get longer loans. Banks have all the reasons to do it if they had ways to ensure collecting on un-paid debt.

EDIT: Depreciation on autos/homes is debatable. This is for new cars. Banks would definitely not want to finance used/older cars that long.

Jimmy The Saint

With the exception of true classic cars, cars depreciate. That is a fact. You buy a 2011 Acura TL, it loses value as soon as you drive it. You buy a house in a desirable neighborhood for market value, it appreciates over time. Here in DC, my house has appreciated in value between 3% and 20% a year. (20 during teh boom) But even during the real estate over inflation my house has never depreciated. My car however always does.....

GWEEDOspeedo

Of course the value of cars depreciate, houses do too (though land can appreciate while a house deteriorates independently), but banks only have to worry about the value if they need to repossess and resell/salvage a particular vehicle. They could care less if your car is worth $5000.00 but you owe $10,000.00 as long as you're making the payments in full and on time. GAP insurance is a huge profit-maker for companies because of those who take long (5-6 year) auto loans and/or don't make significant down-payments.

I think what can really make people think longer loans are a terrible idea, is that people want newer cars too quickly. They buy a new car, keep it two, three, or maybe four years, and then trade for a new one. If those people don't pay off their loans or build enough equity in their autos, they can be upside-down when they go to get another one. People who keep their cars longer than their loans don't see negative effects of having a longer loan.

...of course, out of all the angles on this subject, I think buying within a practical budget is the most important.

jesseray

iTrader: (2)

Dumbest thing ive ever heard of. I did 6 on my TL-S and i wasnt real comfortable doing that, but it got me out of a bad situation with my ex wife. Only reason i did 6. 7 alone is insane.

prime81

the interest will kill you buddy, don't do it. i did 60 months on my CX7 cuz it was 0% financing from Mazda. i am half way through and my owing is more than the value of the vehicle. $700 a month, for 60 months. i don't know what i was thinking. damn it. should've bought a used TL for half the price.

Jimmy The Saint

Its pretty obvious from the posts. You can't afford a new TSX, so buy a 4 or 5 year old one

GWEEDOspeedo

But how long will you keep the CX7? If the answer is over five years then you win because at the end of the loan, you'll own the car and have not paid any interest. You can rub that in the banks' face for every day you keep the car beyond your loan. Maintain it well and keep it as long as you want/can so that when you want to sell/trade it after it's paid-off, you'll consider yourself fortunate that you're getting raw value back since none of your investment was paid in interest.

prime81

at first, i was planning to keep it for a long time but now, i'm just afraid the turbo will not hold for that long. i've brought the car in for many services since ownership. it's pricy owning this CUV. i wanted the RDX at the time but it was $5k more than this with 4.8% for 5 years. almost $1k each month for 72 months. out of my range at the time. anyways, my first and last mazda ever, too many problems.

GWEEDOspeedo

Ouch. Well, it's a hassle, but they should fix it for no cost if it's a malfunctioning vehicle. Maybe these folks can help: http://www.camvap.ca/

1islandparadise

There are companies that deal with old school muscle cars that finance for 10+ years, but usually you dont get rid of cars like these (Hemi Cuda, Superbird, Shelby Cobra) within a few years.

As stated several times above 10 years for an auto loan obviously means you cannot afford the car. I've always finance for 60 months, but always paid my vehicles off prior to 36 months. Just ensure there is no prepayment penatly.

P1zzaman

iTrader: (1)

I wouldn't. Be smart, get a car you can afford

1Louder

You'd never want to do that even if you find a bank that will let you.

First, the car would depreciate much faster than you pay it off. If you totaled it before say year six, you'd owe money just to pay off the loan because the car would not be worth what you owe.

Second, you'd never be able to trade out of it without paying the difference - same reason. I had a 6 year loan on an SUV and tried to trade it at year 3 and had to pay almost $3K to get out of it.

Third, you'll pay an obscene amount of interest.

Fourth, banks know about points number 1 and 2 and they'll never give you one unless you are buying an RV.

However, there is one way to pull it off - 4 year lease and then purchase the car on a 6 year loan. However I could not imagine a more expensive way to buy a car.

If you want cheap payments, buy a less expensive car. Any depreciating asset is a bad item to get a long loan on.