Old news. There was an article, and we had a thread topic on this about a year or two ago. Just as it was then, still is now, a deep and disturbing trend of the economy getting into further trouble by extending debt too far. Think about it, after 6-7 years, how much value can be left in a vehicle? And because the note is that long a term, the entire time a person has a loan that long, they are pretty much guaranteed to be upside down mostly the entire time because they aren't paying down the principal as quickly as a shorter note.
By continually offering longer and longer terms like this, it is perpetuating a downward spiral of debt. Also, terms that long might just as well be likened to the sub-prime mess in the housing market. The sub-prime fiasco was marketted to people who either should not have been able to buy a home otherwise, or should not have afforded the amount of home they got themselves into. Longer term car loans are doing the exact same thing. Can't afford a 4 year note on a new Lexus? No problem, stretch it out over 7 years and now you can!!! Take this, a $30K car with nothing down at 8% and 48 months the payments are $732/mo. Take the same terms but extend it to 84 months and the payment drops to $468/mo, almost a $300 difference. but, in 4 years, when you'd probably want to trade it in, with an 84 month note, you still owe approximately $14,900, or nearly half of what you financed. Also, lets not forget, my example is a little skewed because a longer note will always get a higher interest rate than a shorter one, so you'd owe more than half of the original value than my example shows using the same rate for both. And unless you kept the miles down and the vehicle in immaculate condition, and there is still a market for your trade, you're not getting that much trade in value back on it. Upside down, so typically if people don't have the difference just lying around to pay off the negative equity, it gets rolled into the next car loan. And on and on and on...... This is deeply disturbing.
You can point to this person or that person and tell them how foolish or what kind of mistake they have been making, but when there is a growing trend in the economy as a whole moving this way, its like a slow motion movie of the bus going over the cliff. It doesn't end pretty.
Last edited by froggy81500; 02-23-2008 at 06:03 PM.