Question:

72 or 60 month loan?
I am currently in negotiations with Hyundai to get an 08 Accent 4 door. The only problem is I can only afford it if I get a 72 month loan. In my father's words, "JUST SAY NO!!!" The only thing is I dont understand why. I know that if it takes me 72 months to get it all paid off I end up paying a couple grand more overall, but if that gets me into a great new car as opposed to a crap car that will break down in a couple of years I don't see the problem. Also, if I pay off the loan sooner than that (which I should be able to do, just can't right now as I am in school) it won't cost much more at all. So I just want to hear some arguments for and against 72 month loans. Just so you know, I throughly plan on driving this thing into the ground. That is why I like the Hyundai, as the warrenty can't be beat and I know they are reallly reliable. Any help would be great! I have alreast been aproved at 8%...only because my uncle's best friend is the one dealing with me at Hyundai in terms of financing. No one else will okay me for a loan without a co-signer. And there are no cars at Hyundai that are even halfway what I want to pay thousands of dollars for. At 72 months my payments will be $225, at 8%. That is the BEST I will be able to get anywhere.

Answers:

A-Best: Hi, i wouldn't do it. The Accent is the cheapest model car offered by Hyundai. If you finance the car for 5 or 6 years, you will have to carry "full coverage" insurance on it for the duration of the loan. Depending on your age and driving record, and where you live and drive to this is a substantial extra cost in owning a new vehicle that most people dont take into consideration when making a purchase. Also, consider this.....lets say for example the car is $10,000. You put $1000 down and finance the rest. Depending on your interest rate on the loan, they will decide how much they are gonna make you pay for the car overall. If the interest rate is 6% over the time of 5 years vs. 8%, you will repay an additional $3,000 in interest if you go with 8%. Car dealers are not your friends.....they are in business to get every penny out of you that they can get. If your interest rate is even higher than 8%, i would definitly not go thru with the purchase. How do i know? I bought a leftover 2005 Dodge Neon in Sept. 05. The new models were coming out and i negotiated the price of this car for a few days, haggling and walking away, etc. After 3-4 days of this, i made a deal to purchase the car for $11,200....with $1,000 down. This price was $3,000 less than a 2006 model but it was still "brand new". All along the dealer told me the interest rate on the loan was 6%. When i got into the finance office and made the deal, as i was looking over the paperwork i noticed the dealer got me the loan at 8%. i questioned this, and he said my credit wasn't good enough, although i know now he lied to me....my credit was good. He said, "you want the car, right?" and i said "yes". He shrugged his shoulders and said, "Whats 2 points?" Like it was nothing. I didn't know so i signed the dotted line. Well, i know now!! The dealer added 2 points to the interest of my loan to get the deal and effectively got back the $3,000 i negotiated off the price of the car!!! Damn!!! I figured it out a few months later....i paid full price retail for a leftover model. The car depreciates as soon as i drive it off the lot, 25-35 percent. I am still happy with my purchase, the car has been good and trouble free for nearly 70,000 miles. But, i still gotta make payments for another 2 years now, and still gotta pay $1200 a year for full coverage insurance, and my record is clean. Most people just look at "the payment" of the car....not everything else associated. I can afford the $227 a month car payment, but affording the insurance keeps me close to broke. I also meticulously maintain my car, run synthetic oil and such. Take those costs into consideration too....tires, tune-ups, oil changes, etc. They are not covered by warrenty. If you can only afford the 72 month plan, i wouldn't do it. Your cutting a line too thin between having a new car and any money for anything else for the next 6 years. Look on Ebay at some similar models.....i bet a 2 or 3 year old Hyundai Accent is fairly cheap. That's a hard thing to swallow when you realize you still owe $7-8,000 on a car that you can't sell for $6,000, 2 or 3 years from now. Save your money and buy a used car outright. The smell of a new car wears off quick....and remember this little antidote......"Everyone drives a used car!" Once, you drive it off the lot, its considered used and has way less value. If the dealer has to repo the car at any time in the next 6 years your credit history will have a big black mark on it for the next 10 years. DON'T DO IT!!! Enjoy college as much as possible.....school is tough enuf without having to worry about car payments. Get a degree and you will be able to afford any car you want. The dealer is not your friend, he just wants your money.....don't fall for the smile and charm. I myself have bought and sold used cars for profit for nearly 30 years now, and i do well. I wanted a "new" car for my significant other....even i got robbed by a dealer, and i am "in the business." .......Good Luck!!  

A: First off dont buy new!! DEPRECIATION......... you loose 6 to 8 k driving it off the lot. Look for one with a few thousand miles on it and save big. Make sure it is a simple interest loan. Pay a little more and pay it off sooner if you pick the 72 month term.  

A: Hi, I would personally say a 60 mth loan as it is almost impossible to get a 72 month loan. However in saying that another option may be to put a small balloon payment at the end, which means you pay 60 mthly payments then are liable for a small lump sum. You have the option when you get to the balloon payment of 1) paying it out in full, no further monies owed 2) refinancing for a further period of time 3) trading the car in and starting from scratch Are you sure you can get a loan if you are a student, as you may not have enough capacity to service a loan (government legislation requires that there is a set dollar amount each individual must have in order to live each month) Good luck with it, and hope you get your car  

A: Check how much the interest is and if there is any fees. Avoid going into debt at all costs, because if the interest is 20% and the car is 20,000, then that's 4,000 1st year interest, 4,800 2nd year, and so on. Also don't assume that when you're out of college you'll automatically get a good paying job. It also possible you'll be looking for work for a while and will not be able to find a job to keep up with the payments.  

A: Dad's right in a way...a 72 month loan will cost a bit more in interest payments than a 60 month and six years is a longggg time to be paying off a car. You might think it's great now to get into a new car but after a couple of years, you may change your mind and have less depreciation paid off which puts you in an upside down situation if you want to trade in the car. You'll still owe more than the car is worth.... and after six years of payments, the car won't be worth very much. Car's depreciate the most in the first couple of years so it's always better to buy a one or two year old vehicle, have some warranty left, pay less in insurance and not have to pay for the depreciation. And you should leave yourself a little leeway in payments in case you have other unforeseen expenses. Leasing is a good option to get more car for your money if you have good credit or a co-signer and drive within the mileage limits...after a few years, you just walk away and get into another car. Sit down and figure out all the variables and expenses, crunch the numbers and go from there.  

A: If a 72 month loan will get you into a new car with payments you can afford, I would seriously go for it rather than settling for a used car with higher payments for a shorter period of time I think your reasoning regarding the warranty and reliability is sound, and since you are aware that the additional 12 months mean additional interest, I can't see any reason you would not be prepared for that extra expense. Buy your new car and enjoy it.  

A: you will have bigger payments with 60mo,but also pay less in interest so i would take the 60