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StitcherAuto loans aren’t automatically bad. But they’re not automatically good either. In this episode, Jen and Jill talk through when taking on car loan debt makes sense and when it’s a financial trap in disguise. They share their own experiences with auto loans, why a long loan term could cost you big time, and the rising interest rates that might surprise you (even with good credit).
When you are at different stages of your life, other things become priorities, and you follow those.
Sponsors:
- Jen’s birthday! She’s older, she’s wiser, she’s more beautiful, AND she’s more sure of herself. Like HOW good the chapters are that she wrote in Buy What You Love Without Going Broke. And I must admit they’re good. See for yourself and help Jen afford life until her next birthday by getting your copy at buywhatyoulovebook.com.
Check out some relevant episodes
When To Avoid Auto Loan Debt & When It Makes Sense
This article from Bank Rate creates neither a good nor bad statement about Auto Loan Debt which is a great way to remove the shame of applying for debt while also knowing its downsides.
What Jen + Jill have to say:
Jen & Jill have auto loans, but they list why it can be a bad idea or a decent option for you when buying a car. Jill suggests that you reconsider applying for an auto loan if you think you can’t afford a car. Most car loan terms are between 36 to 84 months. Some may opt for a longer time, but then you’re going to pay far more interest because you’re extending the life of that loan. Jen was surprised when the interest rate for auto loans used to be reasonable, but now they’re pretty high–not even with an excellent credit score, you cannot get less than a 5% interest rate.
However, if you have the cash to purchase the car, such as being able to pay a hefty down payment, an auto loan is a decent option. Do not take out an auto loan to build credit; take it out because you want to have that money allocated for something important. Also, there is a deal on financing, which is primarily applicable to those who want a new car.
How to Avoid Taking on Too Much Car Loan Debt
Let’s talk about ways to get creative no matter what situation you may get in. Finder talks about how to pay off your loan faster, the benefits of a car loan, and what to watch out for.
What Jen + Jill have to say:
To avoid too much debt, Jill wants you to do your research. Know the type of vehicle you want and spend a decent amount of time trying to study it. Ask other people to compare specs and pricing to avoid getting hosed. It would be best if you also considered less expensive or second-hand vehicles because you should take the factor costs of car ownership into account.
For you to pay off your loan faster, Jill agrees to make a sizable down payment and pay a lump sum or extra fees when possible.
Our golden tip for a first-time car buyers
This is not just a golden tip for first-time car buyers but everyone in this climate right now. Jen wants everyone to recognize sunk cost bias or sunk cost fallacy–valuing the time, energy, and effort spent more than the actual outcome.
It’s best to buy a used car for Jill with an ample amount of time spent on research. Start at carcomplaints.com, which compiles all user-generated complaints to tell you which car models have the most and most minor complaints. And when in doubt, buy a Toyota!
Bill of The Week
Thank you Amanda for sharing your bill about paying off the final bill of your credit card (paid off $7500 in 6 months!)
Thanks so Much for Listening!
Thanks so much for listening! Many of you know we have a private community where we do monthly money challenges and offer accountability groups. We want to congratulate one of our members for a big win:
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The Financial Book for the Rest of Us
This book gives real world, real life advice for the lay person to make the most of their money. The suggestions are realistic and don't make you feel like you're missing out financially. Their advice allows you to both save toward goals and indulge on what you like within reason. There's great balance here. I'm more than just put your money here or there. This is about changing how you think about money and spending and saving on what's important to you. I highly recommend both the book and listening to The Frugal Friends podcast.
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