Financial Friday: Just say ‘No’ to Auto Loans of 84 months

Published: Sep. 13, 2021 at 10:55 AM CDT
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HUNTSVILLE, Ala. (WAFF) - Car prices are at an all-time high. Consumers are feeling the pinch. So more and more buyers are opting for 84-month auto loans.

According to credit-reporting firm Experian, about a third of auto loans for new vehicles had terms longer than six years. A decade ago, that number was less than 10%.

Longer repayment terms can have some benefits if your budget requires lower payments. But, they also come with higher costs, and it’s crucial to understand the trade-offs before you opt for an 84-month term.

Patricia Lloyd, with Redstone Federal Credit Union, simply says, “just say ‘No’ to auto loans of 84 months, unless it’s at 0% interest.

Long loan terms might seem like a good deal, but in the long run, it cost more interest and you’ll ultimately owe more than your car is worth.

If you bought a 3-year old car and took out an 84-month loan, your car would be 10 years old when the loan is paid off, according to Lloyd.

She also offered these reasons why you should NOT take out long term auto loans:

  • You are underwater immediately
  • Interest rates typically jump over 60 months
  • Consider all the extra interest you will pay
  • An 84-month loan will likely outlive your manufacturer’s warranty, meaning you may be paying for major repairs while paying off the loan.
  • Bottom Line: Paying for a vehicle that depreciates for 7 years is usually not a good financial practice.

For more ways to save be sure to tune in at noon every Friday for WAFF 48′s “Financial Friday” segment.

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