Auto financing has grown to be a norm among most Americans, where one can conveniently finance a new car and drive off. The top plan has been the 96-month auto financing, which has been on the rise in recent years, where buyers are allowed to make payments for up to 8 years. But the long-term nature of the repayment also makes people ask questions about whether this is the correct financial decision to make. In this blog, we will discuss the advantages and disadvantages of 96-month auto financing plans and also evaluate whether or not it is actually something worth it or could lead to potential financial problems. To develop a comprehensive outlook, we will provide information not only on the option but also insights from experts who will offer the prudence you need to make an informed choice.
What is 96-Month Auto Financing?
Factors such as financing options when buying a vehicle play a vital role in deciding how affordable and flexible the deal would be. An auto financing commitment of 96 months is among the longest financing options in the market, allowing car purchasers to make their payments over a span of 8 years. This long period reduces the monthly payment, thus ensuring that buyers can afford the purchase of a car that would have otherwise been unaffordable.
Nevertheless, the concept of 96-month auto financing raises some important questions. Is it really a good consumer choice? Do the long-term implications have hidden dangers that might outweigh the advantages? Let us examine both sides of the coin.
The Benefits of 96-Month Auto Financing
Apart from extending the repayment terms to 96 months, cars secured through 96-month auto financing also offer a good opportunity to reduce the amount to be paid monthly. An extension of the loan term allows the buyers to make low payments monthly, and this can free up funds for other expenses. This could be life-changing for those on a tight budget. The reduced monthly fee allows one to buy a car with a higher price tag or accommodate the loan without interfering with their finances.
Another benefit is the low-interest rates, which long-term auto loans are typically offered at. Competitive rates are being provided by many lenders with extended financing terms, making it more attractive for buyers to take a 96-month loan. With interest rates being relatively steady in recent years, this form of financing has become increasingly popular among car buyers who want to stretch their budget while still having the opportunity to buy the car of their choice.
Lastly, 96-month auto financing can assist individuals with low credit ratings in obtaining auto financing. Lenders may be more inclined to offer longer-term loans because the repayments are stretched out, reducing the financial risk for both the lender and the borrower. This opens opportunities for individuals who might not otherwise qualify for financing but could use it to improve their credit score over time.
96-Month Auto Financing Risks
Although 96-month auto financing presents a few attractive benefits, it is important to consider the negative aspects associated with such a long repayment period.
The biggest risk is the total cost of the loan. A loan that lasts more than 8 years, even though it may come with a relatively low-interest rate, may end up costing much more in the long term. For example, while the monthly payment might be affordable, the total amount paid for the car over the course of the loan could surpass the car’s value, ultimately resulting in a useless asset. Cars depreciate quickly, and you may end up paying more for the vehicle than it’s worth even before the full cost is paid. This situation is known as being “upside down” on a loan.
Moreover, 96-month financing plans are often associated with high-interest rates. While the monthly payment may appear smaller, the lender, due to the extended loan period, has more time to accrue interest, making the loan more expensive in the end. In some cases, the interest you pay over the course of the loan might surpass the price of the car itself.
Additionally, when your loan period is increased, your equity in the car decreases. This could be problematic if you plan to trade in or sell the car before the loan term ends. If your car’s value depreciates too quickly, you might find yourself in a situation where you owe more than the car is worth, making it difficult to upgrade or switch to another vehicle.
Insights by Experts on 96-Month Auto Financing
An expert on finances, John Smith, writes that 96-month auto financing is a double-edged sword. While it makes the ownership of a car more affordable, it may also put the customer in a financially weak position if they’re not careful with their budget and loans. He goes on to explain that buyers should focus on the overall cost of the loan rather than just the monthly payment. “The goal should be to have the vehicle paid off before it loses too much value. Eight years is a long time, and that may not be very easy,” Smith says.
Smith advises buyers to consider other sources of financing, such as shorter loan terms, or even consider purchasing a used car instead of a new one. While the temptation of lower payments is strong, 96-month loans may turn out to be a long-term commitment that only benefits those with financial discipline and planning.
Alternatives to 96-Month Auto Financing
If you’re uncertain whether 96-month auto financing is the right choice, there are several alternatives that may be easier to manage in the long run. One option is to consider a shorter loan term, such as 60 months or 72 months. While these loans may come with higher monthly payments, they allow you to pay off the car more quickly and reduce the total interest you’ll pay over the life of the loan.
Leasing a car is another viable option. Leasing typically involves shorter-term agreements, and while you don’t own the car at the end of the lease, it offers lower monthly payments and the ability to upgrade to a newer model every few years. Leasing can be ideal for those who prefer to drive newer cars without the long-term financial commitment.
For buyers with good credit, considering other financing options with better terms is also worthwhile. Personal loans or dealer financing with special offers may provide more flexibility, shorter durations, and lower interest rates, helping you avoid the downsides of long-term loans.
Should You Take on 96-Month Auto Financing?
Deciding whether or not to opt for 96-month auto financing comes down to your finances, goals, and the car you wish to purchase. If lowering the monthly payment is a high priority, and you are confident that you can handle the long-term financial commitment, it may be a good option. However, it’s crucial to consider the risks, especially the total cost of the loan and the depreciation of the vehicle.
Before committing to a 96-month auto loan, ask yourself these key questions:
- How long do I plan to keep this car?
- Am I prepared for the possibility of being upside down on the loan?
- Can I afford the total cost of the loan, including interest, over 8 years?
By carefully evaluating the financial implications and consulting with a reliable expert, you’ll be in a better position to determine if 96-month auto financing is the best choice for your needs.
Conclusion: The Long-Term Commitment of 96-Month Auto Financing
In conclusion, 96-month auto financing can be an attractive deal for car buyers who want lower monthly payments and greater affordability. However, the extended financial commitment and higher overall costs can pose significant risks. Weighing the pros and cons, seeking expert advice, and exploring other financing options can help you make a more informed decision.
Understanding the full price of the loan and considering the possible depreciation of the vehicle will enable you to make a smarter decision and avoid future financial pitfalls. When evaluating any financing option, the long-term impact on your financial health should always be a priority. If you plan carefully and understand how the loan affects your budget, 96-month auto financing could be a solution that works for you, but it requires careful planning and responsible use of your finances.
