Wednesday, 10 April 2013

The Eight-Year Loan

I was looking at business news last night and came up on the newest concept....a 97-month car loan.  Eight years of a loan.  I just shook my head.

It creates an interesting scenario.  There are these $50k cars that guys dream about and desire....but readily admit that they just don't have the money to buy those kinds of cars.  But with a eight-year loan?  Well....that changes everything.  The banks are awful happy about this latest concept.

The car dealers and car makers?  Well....they aren't as happy.  This means a guy is kinda locked down and won't be browsing for anything.....for the next eight years.  It'd be acceptable if one guy out of twenty went this direction for a eight-year loan, but you can't have ten guys out of twenty doing'd destroy the dealers and their current strategy.

Years ago....I watched a junior airman buy a $28k Mustang, fully loaded with every single extra that you could imagine.  I sat and asked him how he could afford this.....this was in the late 1990s.  He was lucky in that he had his dad give him $10k for the down payment.  He could make that work easily.

A $50k car with a eight-year loan?  You could go and talk to the Audi dealer and suddenly buy some hyped up Audi TT.  Or you could walk into the Porsche dealership and suddenly talk Boxster.  With the Boxster, you'd have a high-quality car with performance standards that you'd sit and plan out an eight-year life to the Porsche, and probably still get $8k at the end of the eight-year loan.  Fully loaded?  It's round $64k (not counting state sales tax).

Smart idea?  I see one major problem.  If you screw up and buy a Chrysler vehicle that has some obvious negatives that you find to bother you over six's hard to imagine how you survive for eight years with this type of "bond" that you've entered into with with the bank.  I am reminded of that Smart Car I owned for 2.5 years and how I dreamed of dumping it almost daily after twelve months.  So my advice is simply.....if you ever wanted that dream vehicle that was in the $50k range, and could put down $10k on the down is the time to talk to the Porsche dealer.  Don't dream of anything less.

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