The average new car loan was $26,691 at the end of 2012. With a major monthly expense at stake, buyers who intend to finance a new car purchase should generally shop carefully for the best price and terms they can find.
In the fourth quarter of 2012, the average length of a new car loan increased to 65 months, a new record. A larger percentage of car buyers are taking out loans with repayment periods that last for six to seven years, which might help them qualify to buy a pricier car but also increases the effective cost over time.
For example, a borrower with a five-year, $25,000 car loan with a 4.5% APR would have monthly payments of $466 and pay $2,960 in total interest. A seven-year loan at the same rate would have lower monthly payments of $348, but the borrower would pay $1,272 in additional interest over the life of the loan.
About 20% of all car transactions are leases, which means the consumer pays to use the car for a set number of months before returning it to the dealer. Leaseholders who surpass a preset mile allotment typically must pay a penalty for every extra mile driven.
Car manufacturers sometimes offer “subsidized” leases that can make them a better deal than a purchase. As with a sale, a buyer can haggle with the dealer over the capitalized cost (or vehicle price). The money factor (which represents the interest rate) and the residual value (what the car or truck is worth at the end of the lease) may also be negotiated with the lender.
Sources: Kiplinger.com, October 31, 2012; CNBC.com, March 5, 2013; usnews.com, September 14, 2012
INVESTING RISK DISCLOSURE
Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Before investing, consider the funds’ investment objectives, risks, charges, and expenses. Contact Mahoney Asset Management for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
IMPORTANT CONSUMER INFORMATION
This web site has been prepared solely for informational purposes. It is not an offer to buy or sell any security; nor is it a solicitation of an offer to buy or sell any security.This site and the opinions and information therein are based on sources which we believe to be dependable, but we can not guarantee the accuracy of such information.
Representatives of a broker-dealer or investment adviser may only conduct business in a state if the representatives and the broker-dealer or investment adviser they represent: (a) satisfy the qualification requirements of, and are approved to do business by, the state; or (b) are excluded or exempted from the state’s licenser requirements.
An investor may obtain information concerning a broker-dealer, an investment advisor, or a representative of a broker-dealer or an investment advisor, including their licenser status and disciplinary history, by contacting the investor’s state securities law administrator.
SECURITIES: ARE NOT FDIC-INSURED/ARE NOT BANK-GUARANTEED/MAY LOSE VALUE
This information is intended for use only by residents of CA, CT, DC, FL,, MA, MD, MN, NC, NJ, NY, OH, PA, and VA. Securities-related services may not be provided to individuals residing in any state not listed above.
The financial calculator results shown represent analysis and estimates based on the assumptions you have provided, but they do not reflect all relevant elements of your personal situation. The actual effects of your financial decisions may vary significantly from these estimates–so these estimates should not be regarded as predictions, advice, or recommendations. Mahoney Asset Managment does not provide legal or tax advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences.