 TITLE: Are 84-Month Auto Loans a Good Idea? CONTENT: Reasons an 84-Month Auto Loan Might Not Be the Best Idea\n--------------------------------------------------------\nThe main reason to avoid an 84-month car loan: You'll pay more interest. Because these loans tend to be targeted at people with less-than-stellar credit, they often carry higher interest rates than three- or five-year loans to begin with. But even if you get a low interest rate, the longer your car loan, the more interest you'll pay over its life.\nSuppose you buy a $25,000 car with no down payment at 5.09% interest. Here's how three different loan scenarios pan out:\n*   36-month (three-year) loan: Payments are $750\/month; you pay $27,010 total ($2,010 in interest) over the life of the loan.\n*   60-month (five-year) loan: Payments are $473\/month; you pay $28,369 total ($3,369 in interest) over the life of the loan.\n*   84-month (seven-year) loan: Payments are $354\/month; you pay $29,770 total ($4,770 in interest) over the life of the loan.\nIf the thought of paying thousands of dollars in additional interest doesn't persuade you to steer clear of 84-month car loans, consider these other reasons to avoid them:\n*   **Car depreciation**: A new car loses as much as 20% of its value in the first year. Over the seven years of the loan, your car's value will continue depreciating, possibly to the point where you owe more money than the car is worth. That's called being \"upside down\" or having negative equity in your car.\nNegative equity becomes a real problem if you want to sell your car or trade it in for a newer model. The buyer or dealer will only pay you what the car is worth—so you actually lose money on the deal. If you get into an accident and your car is totaled, the insurer will only reimburse you for the car's value, but you'll still be on the hook for the remainder of the loan.\n*   **Outlasting the warranty**: Most new car warranties are good for three to five years. If you have a seven-year auto loan, however, you'll be making car payments for several years after the warranty has run out. Sure, you can pay for an extended warranty—but wasn't the whole point of an 84-month auto loan to keep your costs down? The older your car gets, the more likely it is to need costly maintenance or repairs. Paying for a new transmission while you're still paying for the car itself can be a real kick in the bank account.\n*   **Overextending yourself**: An 84-month car loan lets you buy more car than you can really afford—and let's face it: That's not a good thing. If you're eyeing a luxury car, know that they often cost more to operate, maintain and repair, which can cancel out any savings from the lower monthly payment. And if you lose your job, have to take a pay cut or face a major financial setback, you're still stuck with that (seemingly endless) car loan. END