Cameroon Finance

Jul 8 2017

Whats wrong with 72 month car loans? myFICO® Forums #auto #transmission


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Dealers love “payment buyers” which offer much higher total interest in addition to negative equity. You’ll note that on longer terms (60-72-84 months) the dealers will push “Gap Insurance” which is another big money maker. In theory Gap Insurance covers you when you are upside down (owe more than the car is worth), the problem is that it only covers the lender not you directly. There would be little need for Gap Insurance if it wasn’t for longer term car loans.

Go to any of many “auto loan” sites, Capital One, PenFed, Ally (old GMAC), etc and use car their loan calculator (free online). I think you’ll see that the difference between a 60 and 72 month loan is NOT in your best interest: I don’t know if you can find a lender that’ll go 84 months on only $25k. Of course if you take advantage of a special interest rate like PenFed at 1.99 % promotion, longer payments make sense if you are going to keep the car a long time and cash flow is important to you.

Example: $25,000 loan at 7.0%: 60 months = $495 a month ($4700 full term interest), 72 months $426 a month ($5067 interest), 84 months $377 a month ($6668 interest).


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