Don't Get Taken for a Ride
The average car loan today stretches to about 70 months--up from 62 last year. Some financing companies are even writing auto loans for as long as nine years. And nearly 30 percent of today's new car buyers owe more on their trade-ins than they're worth--up from about 20 percent five years ago. In part, a Wall Street Journal article attributed the trends to people's increasing tendency to evaluate the affordability of what they buy based on the monthly payment instead of the total cost, and the more frequent introduction of new features and designs by auto makers, which entice buyers to trade up before they've paid off their current cars.
Matt's View
Since most people could benefit more from some added financial margin than temperature-sensitive cup holders, the best way to do the car thing is to pay cash. If you're currently making payments on an auto loan, once the loan is paid off just keep making those same payments, but direct them to a savings account instead of your finance company. In about four years you'll have enough to pay cash for your next car--that is, assuming you can get by with one that can't parallel park itself.
This article filed in: Vehicles
Managing Money by The Book
- "I delight in your decrees; I will not neglect your word." - Psalm 119:16
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