10-year auto finance-Reasons not to go for a long term auto loans
The maximum term for financing any vehicle is 120 months which is ten years; it is the longest term for auto lending provided by very less number of lenders. Some lenders and credit union may offer an extended loan for a term anywhere from 96 months to 120 months like from 8 years to 10 years.
There are many reasons for not to go for long term loans as long term loans worth very less, which make it attractive, but there many cons and fewer pros of long term finance. Disadvantages of a long term like ten years auto finance or the vehicle are provided below:-
- More interest rates
The long term auto loans continuously charge more interest as the term of the loan is very long. Taking long term looks very attractive as the amount is less, but if you calculate, you will be able to see that you are paying interest much more than the actual cost of the car. The additional interest which is charged on the long term loan is very high, so for this reason, you must not go for a long term loan.
- Immediate changes
As the market condition changes all the time, and there are very much ups and downs in the price of the product. Hence if you are taking a long term auto loan for ten years, you will able to know that you have already paid much more than the price of the product and you will be able to see the negative equity cycle. Negative equity occurs when the value of a property falls, and in long term auto loans, always the property value falls before the completion of your loan.
- Very fewer lenders offer the long term finance
In the market, there are very few lenders who all are proving auto loans for such a long time like ten years. Long term auto loan is provided only by some smaller institution as it’s a very long period for financing the loan. No lenders lend money for more than ten years.
- Includes repairs cost
As the long term auto loan is for a very long time and you also use your vehicle for that period. The car will start depreciating and will require for repairs which will automatically cost you more. At the same time, you need to pay for the loan and repairs together.
- The car will have lowest resale value
After completion of the long term loan if you decide to resell it, then you will be bearing losses as almost you have used your car for a longer period and paid more than the actual cost of the car. At that period the car value has already gone down due to repairs.
There are many more disadvantages to long term loans; the above mention were few. But the long term loan will be helpful for some people who want to purchase an expensive car and at a lower monthly payment.