Long-term loans go bye-bye ... but that's a good thing
07-27-10, 11:23 AM
#16
And even if you dont borrow at all, the costs are still passed onto you as a taxpayer in the form of recent bailouts
07-27-10, 11:33 AM
#17
Lexus Fanatic
But the problem is, often those "risky borrowers" live up to their name, and stop making their payments, resultion in their cars being reposessed months later. And then these costs are passed onto the honest paying borrowers.
And even if you dont borrow at all, the costs are still passed onto you as a taxpayer in the form of recent bailouts
And even if you dont borrow at all, the costs are still passed onto you as a taxpayer in the form of recent bailouts
As a "A paper" type, I know what rates are available to me and the margins are slim.
07-27-10, 07:13 PM
#19
Lexus Fanatic
No kidding (like really
), that's why the interest rates for those with low credit scores are extremely high, rates that are double-digit
.
Built into those extremely high rates paid by subprime borrowers are the costs associated with the high rate of default for that kind of borrower.
), that's why the interest rates for those with low credit scores are extremely high, rates that are double-digit.Built into those extremely high rates paid by subprime borrowers are the costs associated with the high rate of default for that kind of borrower.
Of course, it is true that no one is forced to sign for a car loan or accept its terms, but a lot of people with little available cash to spend don't have many other choices. And, of course, (not to get too far off-topic because this may be better-suited for the DEBATE section), it was too many car and home-loans nationwide, at too-stiff interest rates, that started the whole economic mess and collapse of lending institutions two years ago that we're mess we are sill in today.
07-27-10, 07:24 PM
#20
Lexus Fanatic
(or, at least, those not paying cash). Sure, it's great to have free money for 5, 6, or 7 years with no interest. But you can, of course, forget that from any reputable bank....they hedge themselves against projected inflation. And, though we sometimes see short-term 0% loans from auto manufacturers like GMAC or Ford Credit, you are not likely to see 0% for longer-term loans unless the manufacturer is really desperate to sell a certain car model. I have seen 0% for 5-6 years, but it is rare. The Cash-for-Clunkers program last year, of course, greatly aided those financing their new cars with one-time Government block-payments of $3500-4500, but programs like that are also rare.
Last edited by mmarshall; 07-27-10 at 07:29 PM.
07-28-10, 08:32 AM
#21
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Well, of course......don't we all? (or, at least, those not paying cash). Sure, it's great to have free money for 5, 6, or 7 years with no interest. But you can, of course, forget that from any reputable bank....they hedge themselves against projected inflation. And, though we sometimes see short-term 0% loans from auto manufacturers like GMAC or Ford Credit, you are not likely to see 0% for longer-term loans unless the manufacturer is really desperate to sell a certain car model. I have seen 0% for 5-6 years, but it is rare. The Cash-for-Clunkers program last year, of course, greatly aided those financing their new cars with one-time Government block-payments of $3500-4500, but programs like that are also rare.
(or, at least, those not paying cash). Sure, it's great to have free money for 5, 6, or 7 years with no interest. But you can, of course, forget that from any reputable bank....they hedge themselves against projected inflation. And, though we sometimes see short-term 0% loans from auto manufacturers like GMAC or Ford Credit, you are not likely to see 0% for longer-term loans unless the manufacturer is really desperate to sell a certain car model. I have seen 0% for 5-6 years, but it is rare. The Cash-for-Clunkers program last year, of course, greatly aided those financing their new cars with one-time Government block-payments of $3500-4500, but programs like that are also rare.I'm so spoiled with it I complain that I'm paying 2.9% on my boat, but I only have 9 more payments on it.
07-28-10, 12:39 PM
#22
Lexus Fanatic
07-28-10, 12:51 PM
#24
Lexus Fanatic
I haven't seen many long-term 0% factory-rates, though......most are for short-term (3 years or less). I think SCRUFFDOG got that good deal because GM wanted to move those vehicles quickly and had trouble doing so any other way.
07-29-10, 09:52 AM
#25
All of you saying that "loans should never be longer than 60 months" are failing in basic economics.
I'd take a 20 year note on a car if it was offered. Why? Because cash is king. If you are choosing the longer term because it's all you can afford, you are probably buying too expensive of a car. However, the opportunity cost of a 24-36 month loan often is more than if you had invested that money. It's not very difficult to receive a 10% ROR even on a conservative investment.
Could I pay off all or a large portion of a car note if I wanted to? Sure, but I'd be losing money by doing so, not to mention having no short term cash - which, if you were paying attention, is the exact reason you are getting 0% offers on cars in the first place. And sometimes, that manufacturer is making more off of you with that 0% 24 month note than if you had chosen traditional financing.
I'd take a 20 year note on a car if it was offered. Why? Because cash is king. If you are choosing the longer term because it's all you can afford, you are probably buying too expensive of a car. However, the opportunity cost of a 24-36 month loan often is more than if you had invested that money. It's not very difficult to receive a 10% ROR even on a conservative investment.
Could I pay off all or a large portion of a car note if I wanted to? Sure, but I'd be losing money by doing so, not to mention having no short term cash - which, if you were paying attention, is the exact reason you are getting 0% offers on cars in the first place. And sometimes, that manufacturer is making more off of you with that 0% 24 month note than if you had chosen traditional financing.
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