4/01/2005

Car loans

Many consumers are having bad experiences with their car payments. Their payments are being known as “upside down” loans, because consumers are lengthening car loans to shorten the monthly payment. The loans stretch out for so long that when consumers trade the vehicle in for another they have to still pay for the trade in on top of the new car. Interest is then just killing the consumer. An auto information publishing company in Santa Monica, California says that “more than a quarter of buyers are upside down when they come in.”

The article suggests that the best strategy of purchasing a vehicle is “to try to match the term of the loan to the time you intend to keep the vehicle.” Another thing to keep in mind is to finish paying of the car loan before trading a vehicle in for a new one.

7 comments:

BOB said...

It is essential to understand the entire loan. Many times people fall into the trap of bad loans and suffer the consequences. The only solution to this problem is to educate the public on the subject and hope that they use the information to make correct decisions. In other words, there is no hope. Loan officers will make a killing on the ignorant.

trudy said...

I don't believe that what is hurting the consumer is the interest rates. What is really hurting the consumer is the need for and expensive vehicle when it they can't afford it. The average persons eyes and ego are just bigger than their wallets can afford.

Nick said...

Bob and Trudy have covered the whole problem. People just want to keep up with the Jones's even if they can't afford to.

Keston said...

I agree that most people just don't understand the loan. They think that by lowering their payment they will pay less, but in the end, they usually pay more. People just need to be better educated about this or they are going to lose lots of money.

Harry said...

I also agree that in the world that we are living in today everyone is trying to keep up with everyone else. Also people don't fully understand the loans and the interest rate.

Dr. Tufte said...

This is covered pretty well. It gets back to the idea that's been discussed on this blog about the need for personal finance as a required high school or college course.

BTW: people also get into this sort of situation by taking a cash settlement for an insurance claim, then not fixing or underfixing the problem. Then they put the VIN into CarFax or something like that and say something along the lines of: "can you prove you fixed that hail damage that you were reimbursed for?"

Vincent said...

This Blog just reiterates the fact that society is not living within their financial means. A common problem mirrored by our federal government. It saddens me that this has become such a problem in the United States and this Blog is in my opinion an important topic to address.