Auto Loan Values: Are You Paying More for Less?

There's a brand new car on display in your local car dealership and you can't wait to buy the auto, or can you? Everyone knows that when you give in to the urge, you'll most likely end up in the car installment trap. You checked the auto loan values from different vendors and decided that you'll take it anyway. You buy the new car with seemingly good financing terms. But wait! Do you really think those very low monthly loan payments are really for your own good?

The auto financing industry is huge and there are many players in the field. This means everyone is contending for a slice of your purse by lowering interest rates and applying current pricing to be more competitive in the market. An even stronger ploy is extending the loan period to as long as 10 years! By doing so, your interest payments can sometimes equal or even exceed the loan value of the vehicle. You can calculate the intrest ratio of the loan arrangement by dividing the total interest over the value of the vehicle. You’ll be surprised to find out that you’re interest payments ALONE amount to 50% to 80% of the actual car value. Now, why would you spend almost double for something whose value will be much lower in just a couple of years' time? Shop around for other financing arrangements; the car can wait and save you the trouble of long-term debt.

Written by: Katrina Marion

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