How Long Should You Finance Your Next Car?

How Long Should a Car Loan BeThere is no hard and fast answer to how long you car loan should be. There are several factors to consider, the main one being what you can afford without destroying your budget. Here are a few key points that may help you decide the ideal car loan length for your situation.

Payment vs. Total Price

When you look at a car, the first thing a salesperson will ask is ”how much of a payment can you afford?” That question is meant to get you to focus on monthly payments instead of the total purchase price. It also helps a salesperson steer you toward a longer loan term for a more expensive vehicle. The thinking is that as long as the monthly payment meets your needs, you may buy a more expensive vehicle, adding to the dealerships profit margin and the salesperson’s commission. As the buyer you need to focus on the total purchase price in order to avoid paying an excessive amount of interest over the life of a loan.

Higher Interest Rates

The longer your loan term is, the higher your interest rate is going to be. In some cases the rate can double just by adding 12 months to the loan term. Take this example for instance. The national average APR for a 60 month note was 2.69 percent in early 2013. All factors being even, extending that same loan to 72 months brought the APR to 4.9 percent. On a loan of $25,000 for a new vehicle, you would pay an extra $2,158.57 in interest and the monthly payment was only $44 cheaper.

Negative Equity

Everyone knows that your car will lose value immediately after purchased and will continue to do so for at least three years. You will be upside-down on the loan during that period, there is no way to avoid it. If you have a loan that lasts longer than 60 months, the added interest and finance charges will cause you to remain upside-down even longer. Depending on how quickly the vehicle depreciates, you may have negative equity in it for as long as five years.

With negative equity comes the harsh reality of not being able to recoup the balance of your loan when you trade the vehicle in. So, if you want another new car before this one is paid off, you will be forced to finance the remaining balance of the original loan as part of your new loan. By doing that, you guarantee that you will have negative equity in the new car for an extended period of time. Additionally, if the balance on the original loan is too high, you may not be able to get approved for another loan until the balance is paid down.

In my opinion, you should never finance a new vehicle for more than 60 months or a used vehicle for more than 48 months. If you opt for a loan of this length, coupled with a reasonable car payment amounting to no more than 10% of your gross monthly income, you will be in a good position to finance your next car.

2014 Dodge Charger Pursuit Police Car is America’s Fastest AWD Sedan

Criminals in Michigan have got it tough. Not only do they live in Michigan, but they also have to be on the constant look out for the Michigan State Police who are now driving the 2014 Dodge Charger Pursuit, which has just won the title of being America’s fastest all-wheel-drive car.

At this year’s Police Vehicle Evaluation at Grattan Raceway, the Michigan State Police got the AWD Dodge Charger Pursuit to set a time of 1:33.85, which is so fast that it is less than a tick of the second behind the 1:33.70 record for rear-wheel-drive cop cars set last year.

The talking heads at Chrysler are predictably pleased with the time posted by the the HEMI-powered sedan housing a 370-hp V8 engine. “With the record-holding rear-wheel drive Dodge Charger Pursuit and now the fastest-ever recorded all-wheel drive model, Chrysler Group offers those who protect and serve us with the best pursuit-rated sedans in the business. And with the only test cars achieving lap times less than 1:34, Dodge Charger Pursuit highlights the segment’s best combination of world-class technology, acceleration, braking, handling and dynamics” said, Peter Grady, Vice President of Network Development and Fleet for Chrysler.

GM Warren Plant Builds 2 Millionth 6-Speed Transmission

Word out of General Motors Warren Transmission Operations facility is that its busy-bees have built their two millionth six-speed transmission. In celebration of the marked accomplishment, the General Motors Foundation is giving a total of $70,000 in grants to a number of organizations in Warren, MI, to include the Warren Symphony Orchestra, Family Youth Interventions, the Big Brothers/Big Sisters of Metropolitan Detroit, Macomb Science Olympiad, Clinton River Watershed Council, Winning Futures, Judson Center, and Warren Lions Club. This foundation is on pace to grant $1.6 million to community-service organizations in the 45 cities that are home to General Motors’ plants and facilities.

General Motors places the six-speed transmissions into many vehicles to include the Buick Enclave, Cadillac XTS, Chevrolet Traverse, Chevrolet Equinox, Chevrolet Impala and Chevrolet Malibu, GMC Acadia, and GMC Terrain.

Michigan-Based Credit Acceptance Corp Posts Strong Q1

With sales force and loan terms increasing, Credit Acceptance Corp is on the rise. With a 9.8 million dollar increase in net income in comparison to last year’s first quarter, the company has proudly reflected on its accomplishments. Loan contract terms have reached a competitive length of 48 months, in comparison to the past’s 36 months, which now gives Credit Acceptance Corp a tactical advantaged to expanding its edge on the competition. A redesigned focus that’s geared towards positive collections and dealer support adds hope for a promising future. Such hope aspires that in four years this quarter will be viewed as the great launch off that birthed great future success.

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Ally Financial To Continue Leasing Support Of Chrysler vehicles

Although Ally Financials exclusive agreement with Chrysler automaker expired on Tuesday, the company will continue its leasing support. The big change coming in the future will be that Ally Financial will no longer arrange subvented leases for Chrysler vehicles but rather this will be handled by Chrysler Capital. The new private-label, full-service lending program was created by Santander Consumer USA and Chrysler.

The Chrysler subvented originations declined since the second quarter of last year when the company posted a recent-high of $0.7 billion. Although Ally Financial reports an overall normalization of its financial based primarily on higher dealer stock prices. So far, Ally is on track with its company financial projections for the year.

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Peninsula Credit Union Auto Loans: 1.99% APR for 24 Months

It is important that new and first time car owners be able to purchase the car they want, and doing so may at times require them to take out a short term loan to buy the car of their dreams. Peninsula Credit Union is able to offer well qualified individuals short term 24 month loans with a fee of 1.99%, providing the time and funds necessary to acquire the desired vehicle. Short-term auto loans like these result in higher monthly payments, but borrowers end up paying much less in total interest.

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VantageScore 3.0 Gives 27 Million More Consumers a Score

Recently, VantageScore Solutions LLC released their new product VantageScore 3.0, and the author of this article takes a gander at what this could mean for consumers. Some of the updated changes including easier ways to interpret your credit score and protection when a natural disaster occurs.  They have also loosened criteria to allow 27+ million more consumers to have a score.

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Cheapest And Most Expensive States For Car Insurance

This article presents information on the cheapest and most expensive average costs of insurance by state. It lists Louisiana and Michigan as the most expensive states, with Maine and Iowa being the least expensive. An explanation regarding Michigan’s high premiums includes a policy of guaranteed unlimited lifetime personal injury protection benefits for treatment of injuries from a car crash.

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Wells Fargo to Replace Ally as New Car Lender for GM?

Wells Fargo, the nation’s largest used car loan provider, has established a new relationship in lending for new cars to General Motors customers. General Motors has ended their primary lender relationship with Ally Financial – previously the nation’s leading auto lender – paving the way for Wells Fargo to provide incentives and indirect financing options for 1600 GM dealerships.

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