I couldn’t find this discussed already, so adding a new topic.
Dear Wife and I recently purchased a new car and agreed to a 63-month loan since it is at 1.9%. This violates Clark’s number 1 rule on such loans: “The longest auto loan you should ever take out is 42 months.”
I don’t see how this can be a bad thing if one can make 4% interest as of now. I understand that may drop soon, but unlikely to go below 2% for some time. What is the drawback of just paying the minimum amount, even if the car value becomes far less than the loan? I don’t expect to sell the cars until it becomes more expensive to repair than it is worth, which should be well over a decade..
Granted, I am financially prepared to increase the payments substantially as soon as bank interest goes below 1.9%, but it seems to me that this is superior than taking a shorter loan with higher payments to begin with. I’m literally making money this way compared to a 42-month loan.
I must be missing something, since Clark is adamant about this rule.