This story was in the Globe and Mail yesterday. It just re-states what I’ve been talking about twice a year or so forever. It’s not because I hate new cars, it’s because I hate you being buried in debt with no way and no hope out!
Stretching car payments to seven years is financial suicide. But they keep getting more expensive so manufacturers, banks and car dealers have no option but to keep looking for ways to make it more affordable.
Unfortunately, they’re all going to make things worse – so much worse. They’ll do balloon payments for seven years and you STILL owe a buyout balance, promote leases…fleeces…where you pay for years then return it because the value isn’t what you owe or just advertise weekly payments. That just makes you think it’s cheaper – it isn’t.
The story states that a ‘recent study’ shows 30% of people owe more than their trade-in is worth. It’s actually closer to 50% according to J.D. Powers.
Before you sign, here are six questions you need to ask yourself:
-You know that you’re signing a large part of your life away, right?
-Add about 30% to your payment to see how much it’s costing you just for transportation off your gross income
-Signing a payment this high means you are predicting continuous perfect finances for the next seven years: No layoffs, downsizing, higher rent or mortgage, no loss of your partner’s income or any negative financial troubles
-You realize you will owe more than the value for at least six years. If you want to trade it, if it’s written off or stolen, you will get the actual value only and need to cover the difference of owing vs. value with cash savings
-You have to love this vehicle in good times or repairs times no matter what for seven years until it’s paid for. It’ll literally be longer than 40% of marriages last.
-You know that the same vehicle as a three or four year old would have been about 40% less expensive, right?