Current automotive trends are showing an increasing popularity in longer-term financing options. Experian Automotive reports that 24.9% of all new-car financing agreements were between 73 and 84 months in the first quarter of 2014. That’s a striking growth of 27.6% since the first quarter of 2013.
The big shift may stem from the fact that longer-term financing can help you free up money every month, as the amount you’re financing is stretched out over a longer time period. However, it’s important to keep in mind that a longer finance term also means that you’ll pay more in finance charges over time. You’ll have to determine whether or not the trade-off of a lower monthly payment is worth the additional finance charges before you decide to buy a new vehicle.
Changing finance trends may mean buying your next vehicle could make more sense than leasing. Here are a few reasons why.
Monthly Payments Similar to a Lease, but with Vehicle Ownership
When you’re in the market for a new vehicle, sit down to create a budget that will help you determine what makes most sense for your wallet. You can adjust the numbers to review how choosing a longer term for financing impacts your monthly auto payment. By choosing a longer term finance length, you could get a monthly payment similar to what you’d pay to lease the same vehicle for a shorter term. An important thing to keep in mind is that when you own, your payments can help build equity in your vehicle. When you lease, you are paying for the use of the vehicle and can drive a new vehicle more often, but you don’t build equity. OEM special incentive plans may be available when you purchase or lease a new vehicle.
Buying Gives You More Flexibility
When you lease, there are typically guidelines and requirements you need to follow as far as the maintenance and modification of your vehicle. When you buy, however, you have more flexibility to maintain and alter the vehicle as you see fit, with the exception of changes or actions that may void your warranty. Ultimately, the decision is yours as the vehicle owner.
You Can Drive as Much (and as Far) as You Like
When you lease a vehicle, you sign an agreement establishing the maximum number of miles you can drive–without incurring extra mileage costs–typically 15,000 or fewer miles each year, according to the Federal Trade Commission. At the end of the lease, if you go over that number, you’ll likely be required to pay a predetermined rate per additional mile. When you own your vehicle, you don’t have to be concerned with potential excess mileage charges.
Vehicle Dependability Is on the Rise
According to J.D. Power, vehicle dependability is on the rise, so drivers can feel more confident in their long-term durability. In fact, Automotive News reports that the average age of vehicles on the road is 11.4 years, which is expected to rise in the coming years. Drivers can take comfort in an increasingly elevating quality standard that could keep their vehicles on the roads for years to come.
Ally has a variety of finance term lengths to accommodate different customer needs, including the growing popularity of longer-term auto financing. For more information, and to see if you qualify for financing through your dealer and Ally, contact your local dealer.