Is it a bad idea to take out a car loan?

"I've read on the Internet that a car loan is a giant waste of money. My father says the same. Is this true?"

Answer
“For some people, yes, a car loan is a terrible idea. The reason why it’s a waste of money for some people is that they don’t shop around, and they don’t understand how loan length and interest rates work.
Think about it. You’re buying a depreciating asset in a car, so if your interest rate is 10%, you’re going to lose tons of money on interest and depreciation over the life of the loan.
The only way to make it worth your while is to buy something within your financial means, make the term as short as possible (36 or 48 months is ideal), and pay the loan off as soon as you can.
By doing this, getting a car loan makes far more sense and you don’t waste money.”
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Eric Schad
Answered on Jul 27, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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