Long term auto loan
The auto mobile rules the world. Over 70 million cars and commercial vehicles were produced the world over in 2008. The United States had a sale of 19.4 million cars in 2007. This shows the magnitude of the sales in the United States.Obviously these cars have to be sold and auto companies need to have a marketing strategy. As far as the customer is concerned a vast majority of them do not have ready cash stacked away. The result is an auto loan which serves the interests of both the customer and the car companies.
A car is an American dream that has become a necessity. Henry Ford launched the mass assembly car that has now become an appendage to American life. The car for an average American is tool for mobility. It's not just a tool but is also a status symbol. Thus for an American buying just any car is not the issue , but buying a good car though a trifle highly priced is of some importance. Sometimes incomes do not support buying a high end car. The solution is a long term auto loan. The phrase long term usually means for periods of 5 to 7 years. Also generally these long term auto loan s are only disbursed to people who opt for high end cars and financed for at least $ 20000 and above. You as an American might well wonder that there could be some hidden catch in such loan s. But the fact is that there is just no hidden cost involved and the loan is plain and simple an auto loan for a long er duration.
These auto loan s are secured loan s. The car is the collateral for this loan. You can even mortgage your house for this car loan in place of your car. This becomes fixed collateral. In such cases the interest is kept low and the risk is reduced. One of the methods is to visit a car dealer personally or you can tap the net and apply on line for a long term car loan. One of the biggest advantages of such long term car loan s is that for a lower installment you will be able to add a high end car to your stable, which in turn gives you, added prestige. Statistics show that on an average 55% of all new car buyers opt for car loan s with a repayment period of five years and above. Also bear in mind that 89% of new car buyers opt for a loan of 4 years and above. This is the result of a study done in 2006 by Bench mark Consulting International. Bench mark Consulting is a financial advisory firm that has worked with all 14 auto motive finance companies as well as all the leading banks. The study shows that the monthly installment or Emil is reduced but the catch is that you will end up paying more interest. Another reason to go in for a long term loan is your financial standing. In case your income levels are low and cannot pay the loan within 5 years then you can exercise your option for a long term loan. Such loan s are flexible by nature and can extend to 10 years and even 15 years.
The question that will be uppermost in the mind of most Americans is whether it's worthwhile to go in for a long term auto loan. On the face of it must be beneficial as can be seen from the figures of the number of persons opting for long term loan on a new auto purchase. One aspect that has to highlighted is that present day cars are better made and also a trifle more expensive, hence the auto loan for a long er period becomes more of a necessity as your monthly payments are reduced. Apart from the reduction of monthly payments the customer gets a bigger and costlier machine. This is good for the auto industry as the cars do not remain on shelf and there is movement of goods in term s of sale as recession has eaten into the vitals of the American auto industry with the bankruptcies of many auto giants.
These long term auto loans are certainly good for the auto industry but what about the customer? A customer must also calculate the repair bills that he will have to pay as the car ages over the years. This will be in addition to his monthly outgoings as loan payments for the car. However in the present age the cars are better built and their warranties are also extended. While buying a car and opting for a long term loan do make it a point to check up on the period of warranty and the time period of the service contract. This could save you precious dollars.
A car loan for a long er period is easy to get. But an applicant with stable employment status and a regular income every month will appeal more to the lender. Bad credits per se is not a deterrent in obtaining loan s but the Annual Percentage Rate (APR) will be higher. A higher credit score will get you a lower APR.
Another negative aspect of such car loan s spread over a long er period is the fact that the car may become dated and you could be saddled with an older model. Also deprecation will eat into the value of your car and selling it after a couple of years may not be the best proposition and could you back by a tidy sum. But not withstanding all that I have written the fact in issue is that long term car loan s are certainly the need of the times. Recession is on and a precious dollar saved will always be a help.