The pitfalls of long-term vehicle finance
Although it may be tempting to sign up for a long-term finance deal and bag that dream vehicle, one report claims that it’s best to steer clear. As well as sky-high interest rates, you might want to consider the following and dodge that long-term vehicle contract.
1. You will pay more than the vehicle is worth.
Indeed, they call this being ‘upside down’ or ‘underwater’. To avoid paying way over the odds, drivers should take loans over the shortest possible period.
The longer the loan period, the slower you’ll gain equity in your vehicle.
2. You’ll be entering into a cycle of negative equity.
Should you find yourself needing to trade the vehicle in before the end of your finance term, you may still owe money on the car. This outstanding finance might then be added to your next vehicle loan. Each time this process is repeated, the greater your debt becomes.
3. Interest rates spike after 60 months.
For those who take out finance agreements longer than 60 months, interest rates will jump significantly. This either indicates that the driver is purchasing a more expensive vehicle or paying more for the same vehicle.
4. If you pay for a used car slowly, you’ll pay more in repair costs.
As cars age, their mileage increases. With added mileage comes an increased requirement for maintenance and a greater risk of surprise repairs. In this situation, you may find yourself forking out for a lot more than just your monthly finance.