84 Month Car Loans in Canada: Smart Move Or Financial Burden?

In recent years, 84-month car loans have become increasingly popular among car buyers. These extended loan terms promise lower monthly payments, making expensive vehicles seem more affordable.

However, with the allure of lower payments comes a potential financial risk. In this article, we delve into the controversial topic of 84-month car loans, exploring the advantages and disadvantages to help you make an informed decision before committing to such a long-term financing option.

Pros of 84-Month Car Loans

Lower Monthly Payments: One of the primary advantages of an 84-month car loan is the reduced monthly payment. By stretching out the repayment period, borrowers can distribute the cost of the vehicle over a longer time frame, making it more affordable within their monthly budget.

Greater Purchasing Power: With lower monthly payments, an 84-month car loan allows buyers to consider more expensive vehicles or higher trim levels that might have been financially out of reach with shorter loan terms. This can provide the opportunity to drive a car with advanced features and improved comfort.

Increased Cash Flow: The lower monthly payments associated with longer loan terms free up more cash flow in the short term. This can be advantageous for individuals who have other financial obligations or want to allocate funds to savings, investments, or other expenses.

Cons of 84-Month Car Loans

Higher Total Cost of Financing: While lower monthly payments may seem attractive, one significant drawback of an 84-month car loan is the substantially higher total cost of financing. Extending the repayment period means paying more interest over the life of the loan, potentially eroding any initial savings gained from the lower monthly payments.

Depreciation Concerns: Cars depreciate rapidly, and a longer loan term means being in a negative equity position for an extended period. If you need to sell or trade in the vehicle before the loan term is complete, you may owe more on the car than it's worth. This situation can limit your options and potentially lead to financial strain.

Limited Equity Building: With an extended loan term, it takes longer to build equity in the vehicle. This means that you may not fully own the car until much later in the loan term, delaying the ability to sell or trade it without any outstanding debt.

Higher Interest Rates: 84-month car loans often come with higher interest rates compared to shorter-term loans. Lenders typically charge a premium for the extended repayment period and the increased risk associated with it. This can further contribute to the overall cost of financing, reducing the financial benefits initially sought.

Potential Maintenance and Repair Costs: As the vehicle ages, it may require more maintenance and repairs. By the time an 84-month car loan is paid off, the car might have significantly higher mileage and be more prone to mechanical issues, potentially increasing your ownership costs.

84-month car loans come with a mix of advantages and disadvantages. While they offer lower monthly payments and greater purchasing power, borrowers must carefully consider the long-term financial implications. Assessing personal financial goals, calculating the total cost of financing, and understanding the potential risks associated with an extended loan term are vital steps in determining whether an 84-month car loan is the right choice.

It is recommended that individuals thoroughly evaluate their financial situation, consider alternative financing options, and carefully weigh the pros and cons before committing to an 84-month car loan. By doing so, you can make an informed decision that aligns with your financial goals and ensures a stable and manageable financial future.