The 84 month auto loan is a relatively new phenomenon introduced to help people afford the higher prices of new cars and offer flexibility in how they pay the loan back. But are they a good idea?
We asked our Georgetown auto loans team to outline the pros and cons of 84 month auto loans as they have the most experience with them.
The pros and cons of 84 month car loans
84 months is 7 years. A long time in car years and a long time to service a single loan. There are definite upsides as well as downsides to having one though.
Pros of 84 month auto loans
The upsides of 84 month auto loans include:
Can borrow more while retaining sensible monthly payments – The more you borrow, the higher the payments. If you want to treat yourself or borrow a little extra, this is how to do it.
Can afford a newer or better car – Leading on from that, borrowing more means you can afford a brand new car, higher spec car or something nicer.
Builds credit for longer – The more monthly payments you make, the more positive hits on your credit report you’ll get. Make every payment on time over the entire loan and your credit score will thank you for it.
Can prioritize lower payments – If you need to minimize payments to keep things affordable, you can also extend a standard loan over a longer term.
Cons of 84 month car loans
The downsides of 84 month auto loans include:
Higher cost over the term of the loan – You’re paying interest for a lot longer, which typically means the overall cost of interest will be higher than a shorter loan.
Potential for longer period of negative equity – If you’re buying a new car, the depreciation will be absorbed by the down payment but also the loan payments. Lower payments mean the potential of being upside down for longer.
Warranty will have expired by the time it’s paid off – New car warranties are typically 3 years with some automakers offering longer. Either way, the warranty will have expired by the time the car is paid for.
Car will be old by the time it’s fully yours – 7 years is a long time in car years and a lot will have changed in that time. Your car will technically be regarded as old by the time it’s paid off.
There are distinct benefits to longer loans but you also need to take into account the potential downsides. Longer loans are cheaper on a monthly basis but more expensive over the term.
You can afford to buy a nicer car but it will be much older by the time it’s fully paid off. The monthly burden of the loan can be lower but it will be with you for much longer than usual.
It’s a balancing act and one only you can decide whether it works for you or not.
When you need help securing an auto loan of any length, we can help.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!