What is finance and sources of finance?

Answer 1

This is a fairly new concept (in the U.S. at least), but many dealerships, banks, and credit unions offer financing beyond the typical 60 month maximum. Mercedes Benz began offering a 7-10 year finance option back in the late 90's.

A lot depends on the car and the buyer's credit in terms of being approved for such a loan. I also understand the interest rates can be (but not always) higher than on a standard 24-60 month lease/loan.

I asked a dealer once who was crazy enough to "mortgage" a car. He said that some people just liked to have the flexibility to pay less or more when they choose and that most people end up paying it off sooner than 84-120 months. He also said that the loans appealed to those who had good credit and income, but fell a bit short of being able to afford a luxury vehicle at 24-60 month terms at that point in their lives, so they take longer loan terms.

So getting back to your original question, check with your bank or credit union first to see if they offer such a loan as they typically offer better interest rates than dealerships. The dealer financing should be your last resort, but check their rates anyway because every once in awhile the dealer or even the manufacturer can come in lower than a traditional bank or credit union.

One last thing, before you decide on a long term loan, do the math. Factor in depreciation on the vehicle you are looking at and take it from there. There is nothing worse, or so I am told, to have a car payment and repair bills. Or a car loan balance that is far more than the car is worth. Compare how much more interest you will pay on a 24-60 month loan vs a 84-120 month loan.

I saw a guy do a 10 year loan on a Mercedes Benz once and just the interest was enough to buy a nice Honda. Ouch. Hope this helped :)

source : http://www.globalfinanceschool.com/blog-post