[BMWCali]

Anything better than 6% 84 months for used auto out there right now? I’m struggling to find anything less than 6.25% other than from small credit unions that have qualifications I don’t meet like living in a specific county or working for a specific employer.

Thanks in advance!

[Dirtbikerr450]

I mean you can always refinance when interest rates go down.

[Jetolso]

84 months?

In 20 years apparently we'll all be driving Ferraris at 300 month terms.

[gknights1]

4.70% 36-60 months, 4.93% 61-72 months on used

https://www.adelfibanking.com/person...ard/auto-loans

[geko29]

Originally Posted by Jetolso

84 months?

In 20 years apparently we'll all be driving Ferraris at 300 month terms.

Tell me you can't afford your car without saying "I can't afford my car."

[BMWCali]

Originally Posted by gknights1

4.70% 36-60 months, 4.93% 61-72 months on used

https://www.adelfibanking.com/person...ard/auto-loans

Thanks gknights1!

[vj123]

I dont think you are going to find a lower rate for a longer duration like 84 months.

[dct203]

You really shouldn’t go 84 months. Even 72 is a massive stretch.

[Allerum]

USAA is giving me 5.6% on 84 for 110k. People always hate on long term loans, it's minimum cash lost for asset use. You can always just pay more. There's no penalty to early pay. But you can do other things with other money.

[tatarwj]

Also take into consideration some places may offer the same rate for 72 or 84mo. At that point, lowers your monthly and buys you time to refinance.

[Jetolso]

Originally Posted by tatarwj

Also take into consideration some places may offer the same rate for 72 or 84mo. At that point, lowers your monthly and buys you time to refinance.

You are paying more interest relative to principal each month.

[geko29]

Originally Posted by Allerum

USAA is giving me 5.6% on 84 for 110k. People always hate on long term loans, it's minimum cash lost for asset use. You can always just pay more. There's no penalty to early pay. But you can do other things with other money.

You can also do a lot of other things with $23k

[modat]

84 months?! Holy smokes.

I’m not your dad but, bro, don’t do it

[Jetolso]

Look at the differences in the amortization schedules:

If you go with 60 mo, your first month you are paying about 26% of the payment to interest.

If you go with 84 mo, your first month the chunk going to interest is about 34%.

If you thought the portion going to interest was fixed - let me introduce you to the SCAM run by financial companies. I found out the details of this travesty out when I got my home mortgage.

[geko29]

Originally Posted by Jetolso

If you thought the portion going to interest was fixed - let me introduce you to the SCAM run by financial companies. I found out the details of this travesty out when I got my home mortgage.

It's actually not a scam, it's just math--simple interest, to be exact. Each month, you pay the interest rate "carrying cost" for the current principal balance for that month. Since the principal is highest at the start of the loan, the interest is also highest then.

Then you also pay off enough principal to "fill up" the total amount of the monthly payment. That part is calculated based on how long the terms of the loan are.

Notice that in both your amortization tables, the interest portion of the first payment is $500 for both the 60 and 84 month loans. That's because the starting balance of both loans is the same. The interest is a higher % of the payment on the 84 month, because the total payment is smaller--that's why the loan stretches out another 2 years, after all.

Now if you want to talk about a scam, look into rule of 78 loans. These are designed to artificially shift even MORE interest to the start of the loan. These are so predatory that they have been illegal for loans >61 months for over 30 years now.

[DocWeatherington]

Originally Posted by geko29

It's actually not a scam, it's just math—simple interest, to be exact. Each month, you pay the interest rate "carrying cost" for the current principal balance for that month. Since the principal is highest at the start of the loan, the interest is also highest then.

Then you also pay off enough principal to "fill up" the total amount of the monthly payment. That part is calculated based on how long the terms of the loan are.

Notice that in both your amortization tables, the interest portion of the first payment is $500 for both the 60 and 84 month loans. That's because the starting balance of both loans is the same. The interest is a higher % of the payment on the 84 month, because the total payment is smaller—that's why the loan stretches out another 2 years, after all.

Now if you want to talk about a scam, look into rule of 78 loans. These are designed to artificially shift even MORE interest to the start of the loan. These are so predatory that they have been illegal for loans >61 months for over 30 years now.

The only two issues with 84 months ...is

1) 95% of people won't pay more to avoid the interest.

2) With the amount of principal and interest your not keeping up with the loss of equity. Which in 36 months in a regular market your upside down.

A better option would be just put 15k down on a 60month then lower the net payment anyway if your looking for a payment in XYB range. Or lease it.

Your correct that money can get a better return in other areas. However most people aren't that skillfull to do all work and avoid the pitfalls.

[BMWCali]

Originally Posted by Allerum

USAA is giving me 5.6% on 84 for 110k. People always hate on long term loans, it's minimum cash lost for asset use. You can always just pay more. There's no penalty to early pay. But you can do other things with other money.

Thanks for the tip! I'll check out USAA. Appreciate it.

And thanks everyone else for all of the unsolicited financial advice.

[Jetolso]

Originally Posted by geko29

It's actually not a scam, it's just math--simple interest, to be exact. Each month, you pay the interest rate "carrying cost" for the current principal balance for that month. Since the principal is highest at the start of the loan, the interest is also highest then.

Then you also pay off enough principal to "fill up" the total amount of the monthly payment. That part is calculated based on how long the terms of the loan are.

Notice that in both your amortization tables, the interest portion of the first payment is $500 for both the 60 and 84 month loans. That's because the starting balance of both loans is the same. The interest is a higher % of the payment on the 84 month, because the total payment is smaller--that's why the loan stretches out another 2 years, after all.

Now if you want to talk about a scam, look into rule of 78 loans. These are designed to artificially shift even MORE interest to the start of the loan. These are so predatory that they have been illegal for loans >61 months for over 30 years now.

It’s a scam - designed to make you pay interest first, and more principal later.

Fair would be to pay a fixed portion of the payment to interest each month, i.e. $1500 principal, $250 interest - each month, every month.

A “logical” amortization schedule that favors paying the interest first is only meant to make the bank whole first and you second. Supporting it is shooting consumers in the foot.

[geko29]

Originally Posted by DocWeatherington

The only two issues with 84 months ...is

1) 95% of people won't pay more to avoid the interest.

2) With the amount of principal and interest your not keeping up with the loss of equity. Which in 36 months in a regular market your upside down.

A better option would be just put 15k down on a 60month then lower the net payment anyway if your looking for a payment in XYB range. Or lease it.

We are in violent agreement. I wasn't trying to justify lengthy loan terms by any means, just pointing out how interest works, since it seems a lot of folks don't understand it.

Originally Posted by DocWeatherington

Your correct that money can get a better return in other areas. However most people aren't that skillfull to do all work and avoid the pitfalls.

I wasn't referring to getting better returns elsewhere. It's actually nigh-on impossible to get a guaranteed after-tax return of 6.5%, which would mean 10% or so on a pre-tax basis. That's what one would need to "beat" a 6.5% loan and come out ahead.

What I meant by having better things to do with $23k was literally dong anything with it other than giving it to the bank in the form of interest. Deciding to pay $133k for a $110k car because you can't afford it is a surefire way to ensure you won't be able to afford the next one either.

[geko29]

Originally Posted by Jetolso

It’s a scam - designed to make you pay interest first, and more principal later.

Fair would be to pay a fixed portion of the payment to interest each month, i.e. $1500 principal, $250 interest - each month, every month.

A “logical” amortization schedule that favors paying the interest first is only meant to make the bank whole first and you second. Supporting it is shooting consumers in the foot.

What you are literally saying here is that if I loan you $100k for a month, I deserve the exact same return for my money as I would if I loaned you $10k for a month. How is that fair? I'm taking ten times the risk, and you're getting ten times the benefit.

What you are suggesting is only logical in your mind because you don't understand interest. It is literally just math.

The cost to borrow $100,000 for one month at a 6% annual interest rate is $500, full stop. 6% / 12 * 100,000 = 500. By the time you've paid off $20k in principal, the cost to borrow the remaining $80k for one month is $400. You see this in your amortization tables, but the formula is the same. 6% / 12 * 80,000 = 400.

[DocWeatherington]

Originally Posted by geko29

I wasn't referring to getting better returns elsewhere. It's actually nigh-on impossible to get a guaranteed after-tax return of 6.5%, which would mean 10% or so on a pre-tax basis. That's what one would need to "beat" a 6.5% loan and come out ahead.

What I meant by having better things to do with $23k was literally dong anything with it other than giving it to the bank in the form of interest. Deciding to pay $133k for a $110k car because you can't afford it is a surefire way to ensure you won't be able to afford the next one either.

Agree fully

[vj123]

Originally Posted by Jetolso

It’s a scam - designed to make you pay interest first, and more principal later.

Fair would be to pay a fixed portion of the payment to interest each month, i.e. $1500 principal, $250 interest - each month, every month.

A “logical” amortization schedule that favors paying the interest first is only meant to make the bank whole first and you second. Supporting it is shooting consumers in the foot.

Paying more interest early in the process is not a scam but math 101 as stated above.

Towards the end of the loan, more money goes towards the principle and bank earns less interest. In this case, are customers scamming the banks?