Before taking out a longer-term car loan, consider the different options to lower your monthly car payments without raising your long-term costs. In auto finance, long term auto loans are becoming more common place.
With the cost of car ownership rising, more car buyers are looking for ways to lower their monthly car payments. The most common method of reducing the car loan payment is to take out longer term car loans that allow the car buyer to pay off their car over six or seven years instead of the usual three to five years.
With these longer term car loans it is becoming more common to owe more than a car is worth in the first two years of a car loan, since the value of a new car drops quickly during that period. With a long-term loan, the car buyer may stay upside down or under water with the car loan for a longer time, as the car’s value declines faster than the car loan balance decreases. An unforeseen problem with longer term car loans is when it comes time to buy another car. At trade in time, the new car purchase may require rolling the unpaid amount from the upside down auto loan into the financing for the next car.
Options to reduce the car loan payment without extending the car loan term include a lower auto loan rate, a larger down payment and a less expensive vehicle.