The Truth about Your Auto Finance Company
You just got a great auto loan deal, or so it seems, from your auto finance company, but do you really know how these financing companies work?
Lenders and brokers have
found an attractive way to get your business - by offering lower monthly payments by stretching your loan period. Sounds great, right? Not so when you add all
those installments and arrive at an amount ridiculously higher than the
spot-cash price for your car.
This is called upside down credit. By dropping loan rates and
giving out almost-instant auto
approval, it may seem that you're saving a lot of money.
However, extending the auto loan period to
more than the average 5-year period can cause a lot of headaches later on.
What happens if your vehicle gets stolen or wrecked? You may still owe a considerable amount of money,
even after your insurance company pays compensation.
Don't forget also how
depreciation significantly downgrades the value of your auto; you may be
driving a car less than what it was originally worth.
So if you must take on financing which
has a longer-than-average loan term, plan on keeping the car for nearly the life of the loan or longer. Or get a car with a good resale value.
Written by: Katrina Marion
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