From the article-
Last month Nakisha Bishop took out a loan to buy a $23,000 Toyota Camry and pay off several thousand dollars still owed on her old car. The key to making it work: she got more than six years—75 months in all—to pay it off....
Ms. Bishop's 75-month loan illustrates two important trends rippling through the U.S. auto industry. Rising new-car prices and competition among lenders to attract borrowers is pushing loans to lengthier terms. In part, banks see the longer terms as a way to attract buyers, by keeping monthly payments under $500 a month.
My first thought- 97 months!?
My second- Suze would NOT approve.
I can't even imagine the interest one would pay on a loan that long. Although I did find it a little confusing where it seems to refer to longer loans as either a way to compete for customers or as a subprime loan. But the article seems to be saying that these consumers tended to have better credit scores. I feel like if you need 97 months to pay off a car, its out of your price range.
This is my first time starting a thread so I hope I did it right!
I literally just heard about this on tonight's news! Nuts!
Potential problem with such long term loans (particularly if you are making a small or no downpayment) is that you will be upside down on your card for a longer time. Consequence of that are:
- you total your car, get insurance payment for the value of the car that will not be able to cover the remaining balance on the loan.
- you sell you car, and the payment you got is not enough to cover the remaining balance on the loan.