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Any downsides to a 72-month car loan

F

FP

Diamond Member
Note: thread was bumped by a spammer (or hacker.) Not a recent thread. -Anandtech Moderator DrPizza

My credit union offers a better rate on their 72-month car loan than their 60-month car loan. I had planned on paying the car off well before 60-months anyway so is there any reason not to go with the 72-month rate?

There is no loan prepayment penalty.
 
If you happen to get into an accident you would be more likely to owe more than the car was worth, aka upside down. Also it would depend on how they apply your extra payment.

Basically the 72 month loan carries more risk to you and less to the lender.
 
How so though? If my P&I payments on a 60-month loan would be $500/month but I decide to get a 72-month loan (with a lower rate) and still pay $500/month it would seem I would be less "upside down" since more money is going toward principal each month (due to the lower rate).

Oh and extra payment go toward prinicpal, not as a prepayment for the following month.
 
Originally posted by: FP
How so though? If my P&I payments on a 60-month loan would be $500/month but I decide to get a 72-month loan (with a lower rate) and still pay $500/month it would seem I would be less "upside down" since more money is going toward principal each month (due to the lower rate).

Oh and extra payment go toward prinicpal, not as a prepayment for the following month.
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You need to do that math because what you're describing isn't the case. The total interest is built into on the front end and doesn't slide.
 
Originally posted by: FP
How so though? If my P&I payments on a 60-month loan would be $500/month but I decide to get a 72-month loan (with a lower rate) and still pay $500/month it would seem I would be less "upside down" since more money is going toward principal each month (due to the lower rate).

Oh and extra payment go toward prinicpal, not as a prepayment for the following month.
Click to expand...

I would check that for accuracy. My contract specifies a dollar amount which must be met for the entire extra payment to go to principal. If it's less than that, it's treated as an extra payment, with a portion going to interest and principal.

 
Gap insurance will protect you in case your vehicle is totaled and you're upside down on the loan. It's really not that expensive. We lucked out and had it on our van that was totaled about a year ago. If it wasn't for the gap insurance, we would have had to fork over a few thousand out of pocket.
 
Ok, used BankRate's car loan calculator to confirm my thoughts...

For simplicity's sake I assumed a $50k loan.

60 months @ 4.75% has a $937.85 monthly payment with a total interest paid at the end of the 60 months of $6270.74

72 months @ 4.5% has a $793.70 monthly payment. Add in an extra $144.15 per payment (to make the total monthly payment $937.85) and the payoff date is the same as the 60-month loan but I would only be paying out $5888.32 in total interest.

The 72-month loan with extra payments is the better deal. I have already confirmed my extra payment go toward principal regardless of their amount.

Now back to my original question... are there any downsides to the 72-month loan? I was thinking about it affecting my credit score, higher insurance rates etc.
 
Originally posted by: TallBill
Originally posted by: MIKEMIKE
Originally posted by: TallBill
Fuck $500 a month car payments.
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dude, that is a $25k car on a 60month loan... thats an inexpensive midsized car...
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Dude, fuck $500 a month + gas + insurance to drive to work.
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good luck always living within walking distance of your job.
 
Originally posted by: lupi

good luck always living within walking distance of your job.
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My car was $10k total and has been paid off for 3 years now. Since then, other then routine maintenance, I've put under $1k into "repairs". My insurance is also like $35 a month as opposed to comprehensive on a more expensive car.

So yes, my statement stands.
 
Originally posted by: TallBill
Originally posted by: lupi

good luck always living within walking distance of your job.
Click to expand...

My car was $10k total and has been paid off for 3 years now. Since then, other then routine maintenance, I've put under $1k into "repairs". My insurance is also like $35 a month as opposed to comprehensive on a more expensive car.

So yes, my statement stands.
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Some people like having nice things?

Not sure, $500 a month all things considered isn't that bad even on the average salary here - which is a LOT lower than most places.

However, if your car payment is more than you pay in rent - well, thats probably another story.
 
Originally posted by: Izusaga


Some people like having nice things?

Not sure, $500 a month all things considered isn't that bad even on the average salary here - which is a LOT lower than most places.

However, if your car payment is more than you pay in rent - well, thats probably another story.
Click to expand...

Some people like to flaunt their shit on 4 wheels, and some people like to enjoy their nice things inside their home. Buying an expensive car is a bitch 'cause of all the car keying assholes, noob drivers who shouldn't have a license in the 1st place, and unavoidable accidents. Sure it's nice driving a 35K+ car, but I would rather spend that money on a nice HT system and some nice recliners in the comfort of my own home.
 
Originally posted by: Izusaga
Originally posted by: TallBill
Originally posted by: lupi

good luck always living within walking distance of your job.
Click to expand...

My car was $10k total and has been paid off for 3 years now. Since then, other then routine maintenance, I've put under $1k into "repairs". My insurance is also like $35 a month as opposed to comprehensive on a more expensive car.

So yes, my statement stands.
Click to expand...

Some people like having nice things?

Not sure, $500 a month all things considered isn't that bad even on the average salary here - which is a LOT lower than most places.

However, if your car payment is more than you pay in rent - well, thats probably another story.
Click to expand...

I never said how other people should spend their money. I just know that if I made $200k /year I'd still keep driving my car. To each his own.
 
Go with the 72 months if it has better term. Just make sure you're disciplined and make the extra payment to the principal. You'll be upside down on your loan til the end so get gap insurance.
 

Thank all to share your thoughts,it is really very useful for me ,i am not having a car ,but i have a idea to buy a car,which type of insurance is best,anybody know share in this forum...
===========
Ramya

Car Loans
 
Originally posted by: ramyam

Thank all to share your thoughts,it is really very useful for me ,i am not having a car ,but i have a idea to buy a car,which type of insurance is best,anybody know share in this forum...
===========
Ramya

Car Loans
Click to expand...

Spammer!

Give me my IPOD!!!
 
I haven't had a good ramyam in a while. Anybody know a good source for ramyam? Not looking to spend a lot of money here guys.
 
Originally posted by: FP
Ok, used BankRate's car loan calculator to confirm my thoughts...

For simplicity's sake I assumed a $50k loan.

60 months @ 4.75% has a $937.85 monthly payment with a total interest paid at the end of the 60 months of $6270.74

72 months @ 4.5% has a $793.70 monthly payment. Add in an extra $144.15 per payment (to make the total monthly payment $937.85) and the payoff date is the same as the 60-month loan but I would only be paying out $5888.32 in total interest.

The 72-month loan with extra payments is the better deal. I have already confirmed my extra payment go toward principal regardless of their amount.

Now back to my original question... are there any downsides to the 72-month loan? I was thinking about it affecting my credit score, higher insurance rates etc.
Click to expand...
You need to re-check your math.

You pay interest on the amount of money you owe on the car.

Also, I don't think most loan calculators are going to work if you are making extra payments. They are designed to work with set payments and figures. Once you start paying extra you change the calculations. This is because most loans don't have a set interest payment (i.e. $140 a month) instead they are calculating the interest you pay on a monthly basis based on a formula that includes loan balanced and your interest rate.

What you really need is amortization table that breaks the payments down monthly. So you can see what the extra money would do the interest and payment.

Seems foolish of the bank to give you a longer term to repay the loan and thus create a loop hole for you to save money. Also, most 72 month loans require the loan amount to be high, make sure the car you pay is price high enough to qualify.
 
Originally posted by: ProfJohn
Originally posted by: FP
Ok, used BankRate's car loan calculator to confirm my thoughts...

For simplicity's sake I assumed a $50k loan.

60 months @ 4.75% has a $937.85 monthly payment with a total interest paid at the end of the 60 months of $6270.74

72 months @ 4.5% has a $793.70 monthly payment. Add in an extra $144.15 per payment (to make the total monthly payment $937.85) and the payoff date is the same as the 60-month loan but I would only be paying out $5888.32 in total interest.

The 72-month loan with extra payments is the better deal. I have already confirmed my extra payment go toward principal regardless of their amount.

Now back to my original question... are there any downsides to the 72-month loan? I was thinking about it affecting my credit score, higher insurance rates etc.
Click to expand...
You need to re-check your math.

You pay interest on the amount of money you owe on the car.

Also, I don't think most loan calculators are going to work if you are making extra payments. They are designed to work with set payments and figures. Once you start paying extra you change the calculations. This is because most loans don't have a set interest payment (i.e. $140 a month) instead they are calculating the interest you pay on a monthly basis based on a formula that includes loan balanced and your interest rate.

What you really need is amortization table that breaks the payments down monthly. So you can see what the extra money would do the interest and payment.

Seems foolish of the bank to give you a longer term to repay the loan and thus create a loop hole for you to save money. Also, most 72 month loans require the loan amount to be high, make sure the car you pay is price high enough to qualify.
Click to expand...

Those numbers are directly for the amort table on BankRate. Their calculators include the ability to add extra payments and see the updated amort table. According to 2 different calculators the math is correct.

FWIW... I went with the 72-month car loan a few weeks ago and will be making the extra payments each month.
 
Originally posted by: ramyam

Thank all to share your thoughts,it is really very useful for me ,i am not having a car ,but i have a idea to buy a car,which type of insurance is best,anybody know share in this forum...
===========
Ramya

Car Loans
Click to expand...

Y hello thar fellow black man avatar!

I-POD GIVERS UNITE!
 
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