Car Loans

 

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Facts to Know:

According to Edmunds.com, the average consumer pays 11% of his/her monthly gross income on a car payment.  Some certified financial planners think, as a rule of thumb, 8% is a more prudent number, especially if you have other debt, such as credit cards or student loans.

According to the Federal Reserve, as of August, 2003, the average car loan term was 5 years, 3 months, (63 payments), up from 4 years, 4 months (52 payments) in 1998.  Financial institutions commonly offer 6-year car loans, and a handful will even offer 7 or 8-year loans!

However, the average American consumer changes cars every three years or so.  You need to realize that, the longer the loan term, the greater the chance that you'll be "Upside Down" -- that is, you'll owe more on your car than it's worth by the time you're ready to trade it in or sell it.  Keep this in mind when considering the loan terms of your "Dream Car."

Your Task:  Calculate Your Monthly Loan Payment

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Some Questions to Consider When you Write Your Conclusion:

Does your loan follow the monthly guidelines regarding the percentage of income?

Did you find it difficult to have the loan "paid up" within 3 years?  If you chose a longer term for your loan, what were your reasons?  Although a longer term loan lowers the monthly payment, does it save you money in the long run?  If so, how much?

Were there any surprises or problems in either qualifying for, or getting a loan?  What were they?

Did you reconsider your car choice after applying for the loan information?

 

 
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