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Loans -
Financial experts Advise: steer clear of long term car loans - 16/04/2008
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Car credit companies have recently introduced longer term loans for car finance. They are offering loans over periods as long as eight years for new cars. The longer period loans result in lower monthly repayments for consumers.
However, industry experts warn that the loans are a bad idea as new cars depreciate in value quickly and you could find yourself owing more than the car is worth. Most new car warranties last for only 5 years, meaning you could still be paying off your car loan after your warranty is up, meaning that you are having to pay for repairs in addition to repayments.
The 7 year loan option continues to gain popularity despite these warnings. Customers just cannot resist the attractive low monthly rates on offer for a brand new model. Although the rates seem attractive at first, long term loans on cars can mean you end up paying much more over the years than with a shorter term loan.
At typical rates, a £10,000 long term loan on a new car could entail £2,500 in interest payments over the years.
Abi Ferrin was stung by a long term car loan when she went to trade her Jeep Cherokee in after 3 years. She found that she still owed more than her car’s value, even after 3 years of keeping up the repayments:
“I was in over my head and I was going to have to pay money to get rid of my car,” she said. “I definitely learned this lesson the hard way"
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