Full Version: Upside Down?
Lets say my finance co. will go up to 84 months. Lets say I buy a vehicle and finance 84 moths for the lower monthly payment. Lets say in 4 years I want to trade in, do I still owe all of the interest for the remaining 4 years or just the remaining principal. Or are auto loans usually front end loaded interest wise?
If its zero APR you'd owe exactly 36/84 of the original amount financed 48 months into an 84 month loan. If the APR is higher than zero you'd owe a larger proportion. The interest is "front loaded" on all loans, because the interest portion of each month's payment is just a percentage of the principal balance.
Lets say you do NOT do an 84 month loan under any circumstances. You would surely regret doing so.
The interest will probably be only "front loaded" in the unlikely event that you have a Rule of 78 loan.
Otherwise, your loan will probably be amortized over the loan term. Your payment amount assuming that your are paying interest will be less than the sum of the remaining monthly payments. However, at the beginning of the loan the majority of the payment is applied to interest and it is only towards the end of the loan with the majority of the payment being applied to prinicpal reduction.
Otherwise, your loan will probably be amortized over the loan term. Your payment amount assuming that your are paying interest will be less than the sum of the remaining monthly payments. However, at the beginning of the loan the majority of the payment is applied to interest and it is only towards the end of the loan with the majority of the payment being applied to prinicpal reduction.
QUOTE(MarvBear @ Aug 3 2006, 05:29 PM) 
Lets say you do NOT do an 84 month loan under any circumstances. You would surely regret doing so.
Totally agree with MarvBear. I would be reluctant to do even a 72 month loan.
When people ask me for advice, I usually suggest a loan term of no greater than 48 months although this is a stretch on many budgets so I can understand people going to 60 months.
Totally agree with MarvBear. I would be reluctant to do even a 72 month loan.
When people ask me for advice, I usually suggest a loan term of no greater than 48 months although this is a stretch on many budgets so I can understand people going to 60 months.
going over 36 months is a no-no.
In the ideal world one can simply pay cash for the car. While completely sympathetic to hegemony's viewpoint of not going over 36 months, I suspect that it is not realistic for everyone to get a car that meets their needs in a 36 month loan. While I strongly recommend that one should not go over 48 months, I have seen many 60 months loans. Unfortunately, I am seeing more and more 72+ month loans.
If you take reasonable care of a car then the car should last 60+ months. The problem with over 48 month loans is that your vehicle needs can change and you may be very well in the unfortunate position of being upside down in your current vehicle.
If you take reasonable care of a car then the car should last 60+ months. The problem with over 48 month loans is that your vehicle needs can change and you may be very well in the unfortunate position of being upside down in your current vehicle.
thats what I figured.
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