Q: Our 23-year-old son is close to buying a car, and he stunned us by telling us he’s probably going to get a 72-month loan. Six years?! Who permits such a thing? Anyhow, what’s your feeling about financing a car for such a long time?
A: First, the durations for loans have been creeping up a lot in recent years, far beyond the two- and three-year terms that were common when we were getting our cars.
Some might argue there are good reasons for such a long term. Loan rates are quite low, and if someone is making good use of the $100 or so a month being saved from taking a long-term loan – investing it at a much better rate, for example – then it’s probably okay.
But what often happens these days, especially among people your son’s age, is that they get the extremely long terms so they can qualify for a more expensive vehicle.
Hey, we’d all like a newer, faster, more expensive car. But at age 23, when jobs may not be especially stable; when roommates might come and go, possibly leaving him holding the bag for more rent than he’d expected; and when a host of other things can transpire, I think it’s a horrible idea to play this game and wind up with six years of payments.
(And, by the way, is it a good idea for anyone of any age to take on significantly more debt than absolutely necessary merely to have a higher status symbol?)
He’s an adult, and you might be unsuccessful dissuading him if he is, in fact, signing on for longer simply to buy something more expensive, as I suspect. But it would be good for him to hear the negative implications of this approach.
A lot of car salespeople make the most of situations with young would-be buyers and provide lots of arguments for those longer-term loans, but I’d bet my six-year-old Acura that he somehow never got around to mentioning the downsides.
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What’s your question? Sharon Peters would like to hear about what’s on your mind when it comes to caring for, driving and repairing your vehicle. Email Sharon@ctwfeatures.com.