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Summary of article:
The article reminds that you shouldn’t just look at the sticker price and monthly payment amount when buying a car. Higher interest rates, longer term installments and higher car prices can push the final payment of a 42,000 yuan car payment to 65,000 yuan.
For most people, cars are expensive but indispensable. According to the data of the used car guide “Kelly Blue Book”, the average price of a new car in the United States in June this year was close to 50,000 yuan. If car loan interest is included, the actual cost will increase significantly.
In May this year, a post appeared on the online discussion forum Reddit. The poster explained that his 62-year-old family bought a 2025 Nissan Infiniti QX50 SUV for about 42,000 yuan (the price of a new car is about 53,000 yuan) because of borrowing money.interest rate The car loan now owes about 65,000 yuan, with a high 75% repayment over 13.7 months; He has to pay 845 yuan in principal and interest every month, but the car doesn’t retain its value at all.
If careful attention is not paid to these two elements, the loan structure and the amount of the initial down payment, a reasonable price tag can eventually turn into a burden.
Financial experts remind you to carefully check the details like principal and interest before signing the documents to buy a car by taking a loan.
Andrew Lokenath, a financial expert at Be Fluent in Finance, said that if the annual interest rate is as high as 13.7% and the repayment is divided over 75 months, the interest will continue to accumulate like compound interest. Based on the loan amount of 42,000 yuan, in addition to various fees, surcharges or guaranteed asset differences, the interest alone will be 23,000 yuan.Insurance (GAP Insurance). To make matters worse, the car loses about 20% of its value in the first year. Even after paying off more than a dozen loans, you may still owe at least 10,000 yuan, and the amount owed is far more than the value of the car.
Calculating interest amortization in monthly installments is a big trap for people taking loans.
Locknos said that the total interest of 23,000 yuan received from the loan will not be displayed on the price tag, and dealers also think that buyers will not ask, but this is a big trap. Many buyers only care about the monthly payments; Dealers often extend the loan term from 48 months to 84 months, reducing the monthly payment by 150 yuan. Buyers think they have made a profit, but they end up paying three more years of interest. Dealers looking for ways to lower monthly payments are pushing back against buyer concerns.
Taking on debt with high interest rates and long term car loans will be a heavy burden. Moreover, buying a car at too high a price in the first place is also a big mistake. Cole Raiken, managing director of car diagnostics company BlueDriver, said the loan amount will increase if the price of a vehicle exceeds the prescribed limit. Buyers are equivalent to borrowing money for a car that is not commensurate with the actual value of the vehicle. Before signing the loan documents, they must ensure that the loan amount is in line with the actual value of the vehicle.
Rocknos concluded that there are four key figures to pay attention to before signing up for a car loan, including the loan amount, the annual percentage rate (APR), the loan term (in months), and the total loan cost (principal and all interest). Locknos said the most important thing is the total cost of the loan, including principal and all interest, which most people never consider when buying a car. He suggests that before signing the car loan contract, you should ask for a repayment schedule, in which each repayment will be clearly listed in terms of interest and principal.
Summary FAQ
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Because the annual interest rate on a car loan is as high as 13.7%, and it is repaid in 75 monthly installments, interest will continue to accrue, plus fees and possible insurance expenses, causing the total loan to far exceed the price of the car.
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The most easily overlooked thing is to look only at the monthly repayment without considering the principal amount, interest rate, tenure and total cost. Dealers often extend the tenure to reduce monthly payments, resulting in higher interest payments.
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Experts recommend confirming four figures: the loan amount, the annual interest rate APR, the loan term, and the total loan cost, which is the principal and all interest, and request a repayment schedule.
