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Long Term Auto Loans

Long term auto loans can be a good deal for car buyers who are willing to shop around and read the terms of the loan contract.

A long term auto loan is usually one that lasts for two years or longer. The advantage to long term auto loans is that the monthly payments are often much smaller than with short term auto loans. The disadvantage is that vehicles depreciate in value over time.

The average vehicle usually loses most of its value by the time it reaches four or five years in age. This means that a person can end up with a worthless vehicle by the time they finish making payments on it. Since most people keep a vehicle only for a few years this can be a very bad deal for the average car buyer.

When to Get Long Term Auto Loans

Car buyers should only seek long term auto loans when they know that they plan to keep a vehicle for a long period of time. That means a buyer should have no plans to sell the vehicle right after they pay it off.

A good suggestion is to do some research before buying a vehicle with a long term auto loan and buy a vehicle with a high resale value. This way the buyer can at least get some of their money back if they are forced to resell the vehicle right after they finish paying it off.

Luxury vehicles such as Cadillac and Mercedes cars often have a much higher resell value than other vehicles. Popular cars like Toyotas often have a much higher resale value as well. Cheaper models and economy cars often decrease rapidly in value so they shouldn’t be purchased with long term auto loans.

Other Advantages to Long Term Auto Loans

The biggest advantage to long term auto loans is that the payments are much smaller because they are made over a long period of time. This means long term auto loans are advantageous for those with low or limited incomes such as people on pensions and Social Security.

A person who only has a few hundred dollars a month to spend on a car should look into the possibility of a long term auto loan. If the buyer’s income increases, the buyer can always make extra payments to pay the loan off early.

Long term auto loans can also be a favorable arrangement for those who don’t plan to put a lot of wear and tear on a car. A person who doesn’t have to trade or replace a car on a regular basis can save money with a long term auto loan.

Be Careful With Interest on Long Term Auto Loans

Since a buyer will be making a lot of payments on a long term auto loan they should get the lowest interest rate possible on the loan. Interest on an auto loan can quickly add up and a high interest rate on a long term auto loan can add up to several hundred dollars.

Getting the lowest interest rate possible is critical when arranging a long term auto loan. An interest rate that is just a couple of points lower can help a car buyer save hundreds of dollars in long term auto loan interest.