Taking a long-term car loan will reward you with more affordable monthly payments, but you’ll be paying for it with more interest. Unfortunately most people are more concerned with their monthly expenses than with their overall debt.
According to CTV, the Financial Consumer Agency of Canada recently said long-term car loans have nearly doubled in the last eight years as the average new car loan last year had a term longer than 72 months (six years), up from 65 months in 2010.
Brigitte Goulard of the FCAC advises consumers to “think about monthly in terms of the car that you can afford. So if you think you can only afford a small compact, go for the small compact. Don't go for the SUV just because you can afford the monthly payment over eight years.”
Choose the car that fits your needs that fits the loan
While most cars can and will last you at around a decade, many people buy new cars much sooner than that. And that doesn’t mean people are simply addicted to upgrading to the newest models every year for no reason. People’s needs change as time goes on and your life may look very different at 30 than it did when you were 25.
If you know you may need a new car in four or five years, you should shop for a loan with that in mind. And just as it is when it comes to saving on any kind of loan, it’s always better if you put down as much as you can up front.