Car Loan Payment

It generally takes around three to four years to reach an equity position in your car… and that’s if you put 20% down on a typical car loan payment of 60 months!

This is eventually where the reality and the frustration of the deal you made a couple of years ago comes home to roost.

And I sense a good bit of car loan frustration in the air about now since the average trade in time for vehicles is somewhere around 3.5 years. That’s right, the majority of people get that new car itch about every 3 to 4 years only to find out that they are ‘upside down’ in their car and the only way out is to literally buy their way out of

the negative equity position either by dropping a good sized lump of cash in with their trade in or trying to roll their negative equity into their next car….. assuming their credit is good enough to do this. If it is then you have just made financing this car even more expensive. And if it’s not…. and you don’t have the cash…. then you are what we call buried in the car.

So, if you plan on extending the length of your car loan to the outer limits in order to save yourself some monthly cash flow and you have resigned yourself to the fact that even though your are paying a large financing cost to do so…… then you should also resign yourself to the fact that you are going to have to stay with this car for a lot longer period of time in order to get out of it cleanly when the time comes to trade it in.

To a degree the people in the automobile industry have shot themselves in the foot by offering such extended times to pay off those car loans. Extending those car payments out to 72 months certainly allows car buyers to be able to afford the car from a monthly cash flow perspective. But it does the buy a bit of a disservice by keeping them ‘upside down in their car for a longer period of time and runs their car loan financing cost up the ladder.