Second, even with a 144-month repayment plan, your monthly payment will be large, and you could end up defaulting. There are two reasons for this: First, the longer repayment period is riskier for any lender because there’s more time for uncertainty. 144-month auto loans, however, charge much higher minimum interest rates. With a conventional auto loan, you can typically get an interest rate below 3%, if you qualify - even as low as 0% in some situations. Even if your car does meet the price requirement, some specialized lenders won’t finance certain cars, especially if they’re high-production models. Lenders typically require that the price of the car exceed a certain value to qualify for a loan with this long of a repayment period. This is no different than someone getting a conventional auto loan for a family car that he or she can’t afford up front.ģ main cons of taking out a 144-month auto loanĭespite the benefits of getting a 144-month auto loan, there are three major problems to consider. If you’ve wanted to own a high-end or exotic car, you may not want to wait until you have the cash to pay in full so you can scratch that emotional itch. “It didn’t make sense to pass on the real estate deal, so I did both.” 3) You can’t afford it now “I took out a loan on my Ferrari because I was also eyeing a real estate investment at the same time,” says Bill Shepard, an exotic car enthusiast from New York. If you have other big financial goals that you’re saving for, it may make sense to hold onto your cash and spread it out amongst your other financial goals. Parting with a big chunk of money at once means you can’t use that money for something else. Over those five years, you’ll have made $519,600 in monthly payments for a total investment of $719,600.Īs a result, you made back 2.8 times your investment when you sold the car. In contrast, let’s say you put down $200,000 on the car and get a 144-month loan with an 8% interest rate and a monthly payment of $8,660. If the one you want to buy belongs to this subset, it may not make sense to put all your eggs in one basket by paying cash.įor example, let’s say you pay $1 million in cash for a car and sell it for $2 million five years later. Some high-end and exotic cars appreciate over time. If you’re not sure whether or not to get a 144-month auto loan, here are three main benefits to consider. It's quick, free and won’t hurt your credit score Pros of taking out a 144-month auto loan
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