New cars are rarely affordable without new car loans

Today, most people can’t come up with the cash it takes to buy a new car, and a loan is an indispensible part of the purchase. At Car Deal Expert, it’s easy to get a premium PCP finance without leaving your home or office. It’s a no-hassle experience from start to finish. There are no application fees, and you’ll get a response to your loan request in minutes. Upon approval, you’ll receive a blank check in the mail and you can walk into a dealership with the equivalent of cash in hand.

The problem with extra-long new auto loans

Because cars have become so expensive, dealers and manufacturers are motivated to provide financing with increasingly long terms to help boost sales. Today, it is common for new auto loans to have five- and six-year (60- and 72-month) terms. But some dealers and credit unions have begun offering seven-year (84-month) and even a few eight- or nine-year (96- or 108-month) loans. According to J.D. Power and Associates, about 82 percent of new car loans today have terms of 60 to 77.9 months.

A longer loan term generally results in a lower monthly payment, and this can be true even if the interest rate is higher than it would be on a shorter loan. But in almost every case, the longer your loan term, the more you actually pay for your car. When comparing loans, don’t look only at the interest rates and monthly payments. Study the figures shown on the lenders’ Truth-in-Lending disclosures, especially the total of payments and the Annual Percentage Rate (APR). When you compare those figures, you may be surprised at how much more you pay for a new car as the loan term gets longer or the interest rate gets just slightly higher.

Another problem with extra-long new auto loans

Another problem with extra-long new auto loans is that most new-car buyers trade their vehicles in after just three or four years. After that amount of time on a five-year loan, the vehicle may be worth a little more than the amount still owed on the loan, and the borrower can use the trade-in as a credit-card car deposit on the next car. But after three or four years on a seven-year term, the borrower is likely to be upside down on the loan and still owing more than the vehicle is worth. In that situation, the debt is generally rolled into the next new auto loan, and the borrower will have no equity in the vehicle until it is very nearly paid off.

Yet another problem with extra-long new car loans

Lack of equity to use as a down-payment on the next car isn’t the only problem with being upside down on a new car loan. If something unexpected happens and the borrower needs to sell the car, the sale proceeds won’t pay the loan in full, which means that it will cost money – perhaps thousands of dollars , to sell the car. Similarly, absent good gap insurance coverage, if the car is totaled, the borrower will still owe money on the loan after the insurance company has paid the replacement value. And generally, when the car has been totaled, the amount remaining on the loan must be paid in full and at once.

Get preapproved for a new car loan before you shop for a car

There’s no denying the appeal and excitement of buying a brand new car. But before you go shopping, take just a few minutes to get preapproved for a new car loan at Car Deal Expert.

• You’ll have more success in your negotiations with the dealer.
• You’ll be less likely to spend more than you can really afford.
• You’ll have a concrete comparison for any financing the dealer may offer.
• You’ll save time and avoid hassle.
• You’ll save money.

Don’t be fooled by low monthly payments. If it takes an extra-long new car loan to make the car of your dreams affordable, then the car is probably not affordable after all. At a minimum, think about waiting until the new car you want is available as a discounted year-end model. Better yet, consider buying a used car. Newer-model used cars are available with extensive warranties and are more dependable than ever before.