7 Year Loans-Even Honda Agrees They're Stupid

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Originally Posted By: 2010_FX4
Originally Posted By: Miller88
I can't imagine they are doing 7 year loans with 0% interest. Honda's finance division is making a killing on 7 year loans.
They may--Ford has done it on 72 month loans for at least 4 years now starting in 2010.


Interesting! Didn't know that.

They have been sending me 0% offers on 60 months for a while now.
 
Moderation is key. Not too long a term, not too high a rate, not too high a price. Debt is a double-edge sword. Used wisely, it can be mutually beneficial. Used poorly, it can ruin lives.

This whole 7 year loan thing sounds like MBA's chasing quarterly sales without realizing they're killing their year over year sales increases. It's no good to have customers locked into paying on a depreciating asset for 7 years, especially one that will inevitably have some significant maintenance expenses on the back end of that term. They won't be back buying another car from that maker when the car needs budget-busting maintenance (brakes, tires) while they're still making payments on it!
 
Originally Posted By: Pop_Rivit
Originally Posted By: Hokiefyd
I'm all about making same-as-cash-payments for 7 years rather than dropping it down all at once. Invest the $25,000 and collect dividends off of it and make your payments as you go. In the end, you'll have more left than if you paid cash up front.

Debt can be a good tool, but only if it's used intelligently.


Ah-the myth of 0% financing. I would assume you'd know that when 0% financing is offered, the price of the vehicle is usually inflated to make up for the finance charges or rebates don't apply.

You didn't really think that someone was going to let you use their money for 7 years with no return on their investment-did you?

Originally Posted By: Hokiefyd
Debtors can be good tools, but only if they're used intelligently.


There. I corrected that statement for you.


Factually incorrect.

A lot of companies like GM and Fiat for example will kick you an additional bonus if you finance threw them, on the 14 Ram's it was $500, and 0% BTW. If you write a check you don't get the $500.

I'd take an 84 month loan in a second if the interest rate was lower than 2%, they are paying me to take the money at that point.
 
Originally Posted By: Miller88
Originally Posted By: Hokiefyd
Originally Posted By: Miller88
It's great for the banks!


Banks generally don't play any part in 0% loans; there is no interest on a 0% loan, by definition, so there's no money to be made. Automakers offer 0% loans through their own financial institutions to drive sales. Banks are really not involved here.


I can't imagine they are doing 7 year loans with 0% interest. Honda's finance division is making a killing on 7 year loans.



I was quoted 2.39% for an 84 month loan from Lightstream, only for those with good credit. Sign and the money would be wired into my account. Discover wants me to take a $25k signature loan for around 2%.

Enjoy it while it lasts, we will see double digit interest rates within our lifetimes.

Than paying cash for a car will make lots of sense, and those of use who saved our cash can enjoy 10% returns on savings while making the last few payments on our 84 month loans @2%...lol.

Here is some more sophisticated financial advice, when money is cheap leverage, when money is expensive don't.

If you look at really wealthy people like our congress for example since they have to publish some financials you will see people with seven, eight, or nine figure net worth's with mortgages and other fairly large loans. Why? Money is cheap right now. Why take $5m out of a bunch of solid stocks to buy a beach house in the Cape when you can get a note for under 5%?
 
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Is borrowing money to buy a car a common occurrence in AMerica? Is the new car market disproporinatley priced so as to make it impossible to buy new?

I take the the view that if I ain't got the pennies, I can't afford it.
 
Originally Posted By: Olas
Is borrowing money to buy a car a common occurrence in America? Is the new car market disproporinatley priced so as to make it impossible to buy new?

I take the the view that if I ain't got the pennies, I can't afford it.

Yes, the vast majority of new and used car buyers are financed, I think upward 80-90% of all buyers financed their purchases.

No, new cars are reasonably priced. Example, 2015 Honda Accord LX can be purchased at around 21,000 USD or about 15,000 British Pounds.
 
Originally Posted By: SlipperyPete
I don't believe I've ever seen a chapter called "Finance your way to wealth with car loans" in any money book written by a millionaire.


Love it !!!
 
Originally Posted By: Shannow
Originally Posted By: SlipperyPete
I don't believe I've ever seen a chapter called "Finance your way to wealth with car loans" in any money book written by a millionaire.


Love it !!!


Hmm, I feel tempted to write that book. But it'd be so I'd become that millionaire.

Tell people what they want to hear, and they will listen. Maybe even pay too.

Only problem is, my target audience likely does not read much...
 
Originally Posted By: hattaresguy
Why take $5m out of a bunch of solid stocks to buy a beach house in the Cape when you can get a note for under 5%?


My folks just built a house in Jacksonville, FL. Could have easily paid cash for it. But they put it on a 20 year mortgage at something like 3% interest. They recognized that they'd be losing money to take cash out of an investment and buy a house with it. Is there risk? Sure there's risk. That has to be part of your decision process.

I love your summation: if money is cheap, leverage it. If it's not, don't.
 
Originally Posted By: Pop_Rivit
Originally Posted By: Hokiefyd
I'm all about making same-as-cash-payments for 7 years rather than dropping it down all at once. Invest the $25,000 and collect dividends off of it and make your payments as you go. In the end, you'll have more left than if you paid cash up front.

Debt can be a good tool, but only if it's used intelligently.


Ah-the myth of 0% financing. I would assume you'd know that when 0% financing is offered, the price of the vehicle is usually inflated to make up for the finance charges or rebates don't apply.

You didn't really think that someone was going to let you use their money for 7 years with no return on their investment-did you?

Originally Posted By: Hokiefyd
Debtors can be good tools, but only if they're used intelligently.


There. I corrected that statement for you.


My stepfather's loan is 1% and he got the car for, I think, $500 over invoice. Paying cash (which he could have done) would have been stupid.
 
Originally Posted By: SteveSRT8
All long term loans are bad news unless the interest is tax deductible.


Or the interest is zero or close to it!
 
I had a thought earlier today: is the downturn in auto sales a few years ago having some impact on this complaint? I mean, people who buy new cars tend to buy new cars every 3-5 years. During the downturn almost no one was buying; just before that cheaper/higher mpg cars were getting sold.

Now they are trading in/up and they have that much less of a trade-in.
 
Originally Posted By: Jarlaxle
Originally Posted By: SteveSRT8
All long term loans are bad news unless the interest is tax deductible.


Or the interest is zero or close to it!


Exactly. My last new vehicle was purchased with a nearly free loan. Price was just shy of 25% OFF LIST. The loan was mine, From my CU , NOT THE STEALERSHIP'S.

Very satisfactory transaction and it costs me peanuts. I'll keep my 40k working for my retirement, thank you...
 
Originally Posted By: SteveSRT8
Originally Posted By: Jarlaxle
Originally Posted By: SteveSRT8
All long term loans are bad news unless the interest is tax deductible.


Or the interest is zero or close to it!


Exactly. My last new vehicle was purchased with a nearly free loan. Price was just shy of 25% OFF LIST. The loan was mine, From my CU , NOT THE STEALERSHIP'S.

Very satisfactory transaction and it costs me peanuts. I'll keep my 40k working for my retirement, thank you...


You should have financed ten trucks instead. You could probably retire by the end of the month. I heard that's how Warren Buffett does it.
 
Originally Posted By: hattaresguy

Factually incorrect.

A lot of companies like GM and Fiat for example will kick you an additional bonus if you finance threw them, on the 14 Ram's it was $500, and 0% BTW. If you write a check you don't get the $500.

I'd take an 84 month loan in a second if the interest rate was lower than 2%, they are paying me to take the money at that point.


You fail to understand that there is no such thing as free money. It simply doesn't exist unless you are receiving a government welfare check. Somewhere that 0% interest rate is being made up and you are paying for it.

On a side note, I assume you meant to say "through them" not "threw them". And I'm not sure what you are referring to with "0% BTW". If you mean "by the way" your grammar is horrid and your sentence structure so poor that it is nearly incomprehensible.
 
If the manufacturer is offering 0% or a very low financing rate such as .9% or 1.9% and there is no penalty such as giving up a cash rebate in order to take advantage of that offer, why wouldn't you take advantage of that? As mentioned, sometimes there even is an additional rebate for using that finance offer.

I get your "no such thing as free money" argument, but if they aren't going to reduce the sale price of the vehicle, and the offer isn't a low APR financing OR cash rebate, why wouldn't you use their money to finance it?

Yeah it's built into the price of the vehicle, but you're paying for it even if you don't take advantage of it.
 
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