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 provided by
avatar
Eric Schad
Answered on Jun 11, 2021
“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.”
thumb-up

Did this answer help you?

Ask us a question by email and we will respond within a few days.
thumb-up

Have a different question?

You can meet us at our office and discuss the details of your question.

Easiest way to compare and buy car insurance

√
No long forms
√
No spam or unwanted phone calls
√
Quotes from top insurance companies