Thursday, 16 April 2020

Why 84-month loans are risky business

COVID-19 may have severely curbed car-shopper demand, but for those in need of a new car, the "buy now" signals are glaring.

The incentive du jour is 0 percent for 84 months, which the market hasn't ever really seen in high volume.

For lenders, interest-free financing is attractive: Lending money is less costly thanks to the Fed rate cut, and subsidized interest rates impact vehicle residuals less directly than cash-back offers. For dealers, longer loan terms grant the opportunity to offer consumers a more favorable low monthly payment and to upsell options such as extended warranties and gap insurance.

But for consumers, the implications are jarring: 84 months is so long, it will take most people a few beats to work out that this equates to seven years. With the average new-vehicle transaction price at $37,000 and climbing, long loan terms keep payments manageable, but this sets consumers up for greater financial trouble further down the road.



source https://www.autonews.com/blogs/why-84-month-loans-are-risky-business

No comments:

Post a Comment