Car Loan Debt
Along with credit cards, car loan debt is one area where people get into trouble. You know that once you drive the car out of the showroom, the value of your car depreciates. If you try to sell it within a year, your car value plunges. That’s because people will think that you have bought a lemon.
Most people don’t realize that one of the most profitable parts of the car dealership business is in the financing of the motor vehicles. There is often more money to be made from the financing than from the sale of the vehicle itself. Just think about it. A 3% loan for 10 years is more than 30%. It will work out to be more than 7% a year eventually.
And guess who pays for it?
You do! And you pay considerably more for it than you would from many other types of borrowing. You are probably paying interest on not only the purchase of the vehicle but also the insurance, the warranty and any other additional items that the dealer talked you into at the point of sale.
This makes for a very expensive vehicle and before many people know it they find themselves in difficulty making the monthly payments.
So how do you get out of the situation?
You need to consider what alternatives you have to reduce your automotive debt and that might mean selling your expensive motor vehicle and getting something a little more realistic considering the situation you are in. Especially with expensive oil prices, new ERP gantries that collect money from 5.30pm to 10pm, and expensive parking (I just paid $12 for parking on a weekday afternoon at Suntec), you might want to reconsider having a car.
Cars are very often an emotional buy, where the impression that your new vehicle might have on friends, family and neighbours might influence your decision into buying a more expensive vehicle by borrowing more.
You need to look at it a bit more realistically and consider what you have to deal with on a daily basis trying to make ends meet due to your car payments and then look for a better alternative.
If you can manage with one car rather than two, then offload one and use the money from that to reduce debt.
If you can get rid of your expensive vehicle that you have financed and have sufficient funds to pay cash outright for a lower grade vehicle, provided of course that it is reliable, then that would be a wise move and have a huge impact on your monthly budget.
It could also be the fast track you need to get back into a better vehicle sooner without all the debt.
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i hate car loans because sometimes that interest rate is not very fair`”.
i had my car loan last year when i bought a Nissan Murano because i really like to have my first car ‘-”