Pros and cons of an 84 month car loan
Pros and cons of an 84 month car loan
Posted on May 13, 2020
Apparently, 84 month or 7 year auto loans are becoming increasingly popular with the buying public. That seems a very long time to service a car loan and while there are some benefits, such a long term may not work for everyone.
As with any financial decision, getting a car loan deserves careful thought and the weighing up of the pros and cons.
The pros of an 84 month car loan
There are a couple of significant benefits to a longer car loan.
Low interest rates – Longer car loans will often have a lower interest rate than shorter ones. However, as you’re paying that interest for longer, they won’t always be cheaper than a shorter loan.
You could borrow more – A longer loan term means a lower monthly payment. You could turn this into more money at the end of the month or borrow more. Many buyers will elect for the latter and buy a more expensive or more luxurious car.
Lower monthly payments – As mentioned, a longer auto loan means lower monthly payments. You will have to balance the longer period of interest with the benefit of a lower monthly payment but it may work in your favour.
Longer credit building period – If you are also using your car loan to rebuild your credit score, a longer loan could help. The difference won’t be huge but you will have a longer track record of making payments on time at a more affordable amount.
The cons of an 84 month car loan
Longer car loan won’t work for everyone or in every situation.
Longer period of negative equity – You are in negative equity for the first few months of a car loan depending on your down payment. This means you owe more than the car is worth during that time. A lower monthly payment over an extended term means this period could be much longer.
Longer period of interest – Even though 84 month car loans are usually at a low rate, you will be paying that rate for much longer than a traditional loan. That may work for your personal situation or it may not. Either way, you should calculate the total interest payable over the term and compare it to a standard auto loan before you sign.
7 years is a long time to own one car – Not many of us keep the same vehicle for 7 years. If you buy new the warranty will have expired, new models will have arrived, new technology will have been introduced and you will be still driving the same car. It works perfectly well for some but not for everyone.
An 84 month car loan may make perfect sense for you in the right circumstances. But it also may not. If you need help with car finance or want an auto loan, Car Nation Canada are ready to help.
For more information please visit https://www.dixieautoloans.com/