Is A 72-month Auto Loan The New Normal?

[Anonymous]

I think it is partly due to higher price of vehicles today, and secondly to make it affordable for just about everyone's income level. 

$25K makes the payment around $400 depending on the APR, which is a lot more doable for the regular folks. Where as others would rather pay higher payment for shorter term. 

Even when cars were much cheaper and the APR was mich higher, they were still seen affordable for the average person. Today we're also stuck behind much higher rent as well as car payments, and for some people it's difficult to get along on only one income. 

If i could buy a car at prices say 15 years ago, with the low rates of today my payment would be a fraction of what it is today!

Although it doesn't help that I spoiled myself on the creature comforts of heated steering/seats, cooling seats, collison alerts, smart cruise w/auto breaking, sunroof etc. However, you almost can't buy a stripped down model today and definitely can't buy one with only certain options as they sell them in "packages" and in oder to get the one you want, you also get one or two you don't really need.

Since auto prices aren't going to go down, the only thing you can do is wait for the best deal you can find. Preferrably on a late model that has already take the hit on depreciation and still has some warranty left. 

[Shooting-For-800]

It all depends on the car, lifestyle, and APR.

I got 72 months at 2.49% with $0 down from Cap One on my wife’s new car.

It was the same rate for 48 months.

I pay $50 extra per month and are no longer upside down.

We bought a brand new Honda at 20% off sticker price.

We keep our cars for more than 72 months.

Just depends on the situation...

[ridgebackpilot]

Last December, I got 0% APR for 60 months on a new 2019 Ford Edge. I didn't want to go for 72 months because I was concerned about being underwater on the car forever.

I didn't pay a downpayment on the car because...why would I?! With zero percent interest, I'm getting the loan for free. Why would I want to buy equity in a depreciating asset? Homes are different because they occasionally appreciate. Most automobiles depreciate forever unless they become collector cars, decades hence.

Even with zero percent for 60 months, I purchased GAP insurance to cover the expected shortfall in the first couple of years if the car is declared a total loss and I owe more on my loan than the car is currently worth. For any loan of 72 or 84 months, it would be even more important to buy GAP insurance.

[Flexfanatic]

So here is a real life example. I purchased a 2017 Jeep Wrangler Sahara new at a lower interest rate for 72 months. Now I normally keep my cars for 8 to 10 years but I went to CarMax today and the appraisal came back for $32K and I owe less than $23K.

Why do you ask? Because Wranglers hold their value extremely well, COVID-19 is causing a increase in used vechicle prices, and a majority of my payments go to principal but I pay another $50 towards principal when I feel in the mode.

[Gladius]

---

@Flexfanatic wrote:

So here is a real life example. I purchased a 2017 Jeep Wrangler Sahara new at a lower interest rate for 72 months. Now I normally keep my cars for 8 to 10 years but I went to CarMax today and the appraisal came back for $32K and I owe less than $23K.

Why do you ask? Because Wranglers hold their value extremely well, COVID-19 is causing a increase in used vechicle prices, and a majority of my payments go to principal but I pay another $50 towards principal when I feel in the mode.

---

So did you sell it to them or was just curious?

[Flexfanatic]

---

@Gladius wrote:

---

@Flexfanatic wrote:

So here is a real life example. I purchased a 2017 Jeep Wrangler Sahara new at a lower interest rate for 72 months. Now I normally keep my cars for 8 to 10 years but I went to CarMax today and the appraisal came back for $32K and I owe less than $23K.

Why do you ask? Because Wranglers hold their value extremely well, COVID-19 is causing a increase in used vechicle prices, and a majority of my payments go to principal but I pay another $50 towards principal when I feel in the mode.

---

So did you sell it to them or was just curious?

---

I did not sell it to them but I plan on it. I did not have my title in hand but I'll be heading back either today or Monday to seal the deal. I may also entertain getting an appraisal for my 2008 MB C300.

[Gladius]

---

@Flexfanatic wrote:

---

@Gladius wrote:

---

@Flexfanatic wrote:

So here is a real life example. I purchased a 2017 Jeep Wrangler Sahara new at a lower interest rate for 72 months. Now I normally keep my cars for 8 to 10 years but I went to CarMax today and the appraisal came back for $32K and I owe less than $23K.

Why do you ask? Because Wranglers hold their value extremely well, COVID-19 is causing a increase in used vechicle prices, and a majority of my payments go to principal but I pay another $50 towards principal when I feel in the mode.

---

So did you sell it to them or was just curious?

---

I did not sell it to them but I plan on it. I did not have my title in hand but I'll be heading back either today or Monday to seal the deal. I may also entertain getting an appraisal for my 2008 MB C300.

---

How do you have the title when you are still paying on it?

[Flexfanatic]

---

@Gladius wrote:

---

@Flexfanatic wrote:

---

@Gladius wrote:

---

@Flexfanatic wrote:

So here is a real life example. I purchased a 2017 Jeep Wrangler Sahara new at a lower interest rate for 72 months. Now I normally keep my cars for 8 to 10 years but I went to CarMax today and the appraisal came back for $32K and I owe less than $23K.

Why do you ask? Because Wranglers hold their value extremely well, COVID-19 is causing a increase in used vechicle prices, and a majority of my payments go to principal but I pay another $50 towards principal when I feel in the mode.

---

So did you sell it to them or was just curious?

---

I did not sell it to them but I plan on it. I did not have my title in hand but I'll be heading back either today or Monday to seal the deal. I may also entertain getting an appraisal for my 2008 MB C300.

---

How do you have the title when you are still paying on it?

---

I should clarify. For Maryland residences after purchase we receive a copy of the title (a certificate of title), the lien holder has the actual title.

[ccquest]

I did 72 months on my current car, but it's also at 0%. Although I get the argument of being underwater or not having equity in the vehicle, I still say it's just a matter of WHEN you're wasting your money. It's either up front as the down payment or somewhere down the line when you're negative or rolling it into a new vehicle. Most cars are depreciating assets and won't ever make you money.

There are many people extending themselves too far (I kinda was when I got my car too) by getting the 84 month loan, but if it works for their situation, more power to them.

[Anonymous]

Despite what you might want to buy, you really have to look at this two-parter: 

1.) Does the depreciation of that particular vehicle fit into the term you wish to take out the loan for? 

2.) If not, do you have cash on hand to make up that difference if you ever need to get out of that loan? 

Unless things have recently changed, and I mean very recently, a half-ton would not be a good idea to go 84 months unless you are buying some absolute stunner of a truck, like a Shelby F-150 or Raptor. I would not even go 84 months on a Denali. 

Now I'd go 84 on a very small number of vehicles. No exotics or dicey European cars. It would have to be something you can easily unload and takes minimal depreciation in the first few years. Superduty, super crew, 4x4, diesel, long bed, top trim level. Perhaps a 4Runner or Tacoma TRD Pro. Something you know will last, and I'd make sure I was warrantied for the LIFE of the loan. If the factory gives you 5 years, that's fine, but have a plan B to obtain a warranty that your dealer or independent actually works with.