A 120-month car loan is the best way to finance your vehicle for as long as you will keep it. Sometimes cars get better gas mileage, perform better or last longer than expected, unlike some other major purchases that may not live past the two-year mark. If you look at a 120-month loan with an average of 5 percent interest as an investment instead of a financing decision, a $10,000 car would cost about $443 per month over five years. That might seem like a lot for some people, even if they get good gas mileage from their vehicle. If you put that same cash into a standard investment portfolio over 12 years with a 4% annual return, it would generate an average of $3260 per year. In the end, a 120-month car loan might have exactly what you need if you have the ability to pay for it.
When to Consider a 120-month Auto Loan
It’s not always the best option to finance a car for 120 months. You really only need to go up to a monthly payment of about $500 or more if you will be driving your vehicle for about 12 years. In some of the examples provided, I saw that your payments could go above in some circumstances in the last-quarter payment calculation for a 120-month loan, which is unusual but certainly not impossible. And while we never push, pressure, or coerce any of our customers into financing options, what we do say is that one size does not fit all when it comes to financing your car.
Risks of a 120-month Car Loan
Although a 120-month auto loan may seem like a good idea in the short term, some definite risks are attached to any payment agreement lasting this long. For one, you have the potential to lose money. If you take over $2500 off the top of a car that’s worth $10,000 to finance it through a 120-month plan at 5% interest, your contract is going to last for 12 years and will cost approximately $8612 if everything goes as planned. When you divide that number by 12, you get about $750 per month. However, that number fluctuates no matter what your rate is. But even if your monthly payments averaged about $1000 each month for those first 12 years, there is still a chance that even WITH financing fees and an annual percentage rate (APR) of 5%, you would not make back your initial investment of $2500 in year 13.
Alternatives to a 120-month Car Loan
If you want to finance a car for 120 months – which we recommend on a few occasions, a $3000 loan at 5% would be about $215 per month and would cost approximately $10,905 over sixty months. That is a lower monthly payment than with the 120-month, but because you would afford most of your vehicle within those first few years, you might try the shorter term and then toss some money into another investment with 18 years or so left on it as your next step in financial success.
How to apply for a 120-month Car Loan?
The application process for a 120-month auto loan will be the same as any other. In essence, you will need to fill out any applications asked of you by your local bank or online provider. There is no particular type of form that should be used because most applications do not have complicated questions or deals. If you understand the rules and regulations of financing a car at that length of time, it’s pretty straightforward. Getting your vehicle financed for 120 months gives you the benefit of having an extra year to pay off your loan and save up some dough at the same time. To see how much financing is possible through your bank or preferred lender, fill out ourк form with your desired vehicle – either through a form or our on-site system directly – and we will help you quit today!
What are the Documents Required to Apply for a 120-month Car Loan?
If you are using the dealership to re-finance an auto loan with a 60-month loan term, your only other document may be proof of employment, as it should not be financial or insurance-related. However, you may still choose to bring in forms of identification and proof of residence as well. If you have possession of the vehicle through finance already, you should bring some form of vehicle registration showing your name and current address.
- Print out a copy of your current policy.
- Consult with the agent and find out what is the lowest possible rate you could get for the parameters that you have included in your profile.
- Save time by not doing the math. Use our auto loan calculator to determine the cost of loans and other cost comparisons, the total amount of payment, and how much it would cost for insurance.
- Complete Insurance form at the agent so he/she can fax it to a carrier (doesn’t need exact amount yet)