By on June 3, 2020

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They’re still out there, just not in the same concentration as before. Two weeks after the U.S. auto industry restarted production in force, long-term, no-interest loans are becoming as hard to find as Lysol wipes.

At General Motors, which wooed many a truck buyer with zero-percent/84-month financing during the coronavirus lockdown, the good times seem to be over for buyers. However, some lucky individuals might be saved by timing.

As reported by CarsDirect, dealer incentive bulletins show the 0%/84 month bonanza is over at Chevrolet, GMC, and Buick. Going into effect Tuesday, the new June offers show only a zero-percent/72-month offer for those looking to get into a new Silverado, say, with the lowest possible monthly payments.

Full-size pickup sales never fell more than 25 percent below pre-virus estimates during the depths of the lockdown, leading to dwindling pickup inventory as plants remained shuttered. GM, Ford, and Fiat Chrysler restarted production May 18th, with GM ramping up truck output this week. Dealers are hungry for new stock. Buyers, on the other hand, will be forced to pay more.

That said, the 4-month payment deferral GM touted during the lockdown is still a thing — just not for buyers seeking zero-percent loans. Bummer. However, for those who started the buying process before June 2nd, GM will honor its previous offer.

Lease offers appear unaffected by the June change-up, so there’s the possibility of scoring a good deal there.

Elsewhere in the industry, Hyundai has scrapped its zero-percent/84-month offers, while Ford has deep-sixed its 120-day payment deferral.

Nature is healing.

[Image: © 2020 Chris Tonn/TTAC]

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46 Comments on “Wave a Solemn Goodbye to Cheap 84-month Loans, Shoppers...”


  • avatar
    ToolGuy

    Recommended reading: “Antifragile: Things That Gain from Disorder” by Nassim Nicholas Taleb.

    If you can get past his ego and his writing style, this book will change your views on banking and health care, among other things [might even be some relevant business implications for certain OEM’s].

    TL;DR: The world can be split into three categories – things which are:
    • Fragile
    • Robust
    • “Antifragile”

    The banking system which supports 84-month loans is Fragile. A customer who signs up for an 84-month loan just slid further toward the Fragile category.

  • avatar
    honda1

    Very foolish to finance a car/truck for 84 months, or even 72, ESPECIALLY A GM VEHICLE. 48 months should be the max allowed.

    • 0 avatar
      MiataReallyIsTheAnswer

      When the rate is zero percent, WHO CARES!?? You think a brand new ANYTHING will not last 6 or 7 years?? Many people keep a vehicle 10 years – in that case why not a NINE year loan? What does it matter? Just so you can “feel neat” having it paid off a couple extra years, and for that neato feeling the payments are higher? What a deal!

      • 0 avatar
        jack4x

        It’s such a weird mindset and so many commenters on car sites have it. Best I can tell, it’s a mix of:

        -Judgemental – That poor person can’t REALLY afford that car, so they shouldn’t be driving it.

        -Holier than thou- I came up from my bootstraps and haven’t borrowed a dime for a car in my life, recognize me and my used Corolla!

        -Dave Ramsey style DEBT IS EVILLLLLL ranting, closely related to the previous point.

        -Unfounded worries that wave of defaults on long auto loans is imminent and will somehow presage another economic crisis, based on misunderstandings of the differences between mortgages and car notes.

        • 0 avatar
          PeriSoft

          @jack4x

          This, this, this! If someone is offering you the use of their money for free, there’s nothing wrong with taking them up on it. Now, if you’re at serious risk of not being able to pay back that money within the term, it might not be a great idea, but that’s a separate issue. There are plenty of people with stable, mid-paying jobs that can put GM or Hyundai or whoever’s money to good use for the next seven years. Nothing wrong with that.

          Now, if someone is offering you $6k off the top *or* the cheap loan, well, you better get out the ol’ calculator. But there’s nothing intrinsically wrong with a long loan as long as you understand what’s going on.

          • 0 avatar
            bobbysirhan

            That’s the fact jack. When I bought my dining room table, the salesman immediately offered me ‘free’ financing without my prompting. When I told him I was paying cash, he suddenly remembered a sale that would give me 25% off the marked price. I was so turned off that I bought it somewhere else for less with quicker delivery for about 40% off. I would have loved to support a local business over a global corporation, but not if the service is worse, the price is higher, and they insult my intelligence. I was cool with the higher price. I wouldn’t have known about the crummier service, but then they treated me like a credit slave.

        • 0 avatar
          krhodes1

          So much this. Especially your last point – unlike mortgages, car loan risk IS appropriately priced into the loan, with a vengeance.

          I could pay cash for darn near any car I ever would desire to buy, but you better believe that I would take the longest term 0% loan I could get given the option (provided it doesn’t affect the bottom line price). Doesn’t mean I wouldn’t pay it off years early though (I just paid off my Fiata after 15 months). But I like the flexibility of the lower *required* payment.

          It’s not debt if you can pay it off anytime you feel like it.

      • 0 avatar
        honda1

        @Miata
        Yes a new anything will last 6 pr 7 years. My point is that its not very wise to finance a quickly depreciating vehicle for a long term. And yes it does feel very “neat” to live with everything paid off, especially in these turbulent times.

        • 0 avatar
          DenverMike

          A lot of us aren’t on a fixed, guaranteed, federal, etc, income.

          So yeah we love (gotta have) the debt-free piece of mind.

          Mostly our income comes in waves, so when a large chunk comes along, you look around to what needs fixing, investing in or will improve our lives the most.

          Upgrading to solar is a good one, but yeah I paid cash for my ’05 F-150 STX supercab V8 4X4 in ’04, so burn me at the stake.

          Paying cash forces you to get real about a lot things. It came with crank windows, manual locks and vinyl knit seats (originally).

          I didn’t expect to still own it, but life happens. It was a great investment (it turns out) since I still drive it everyday, it hasn’t let me down, and thanks to a bunch of tasteful upgrades, mods, customization, I get much enjoyment out of it.

          • 0 avatar
            jack4x

            @DenverMike,

            I have never and will never trash someone for buying whatever vehicle they want, and paying in the way they want or need.

            I’m only sick of blanket comments like:

            “Very foolish to finance for 72/84 months”

            or “84 month loans are for people who can’t afford a 48 or 60 month loan”

            or “It’s always better to pay cash”

            I’m always going to dispute that kind of statement.

        • 0 avatar
          Scoutdude

          I’d say it feels very “neat” to be sleeping on a pile of cash in these turbulent times that is larger due to the fact that I financed and still owe money on a car I could have easily paid cash for.

          • 0 avatar
            JimC2

            Better do something with it before the hyperinflation sets in from the gazillion trillion dollars of stimulus.

            Those 84 month low interest loans are gonna look good in hindsight once inflation outstrips their interest rates.

      • 0 avatar
        ajla

        “What does it matter?”

        It’s 2017 and I make $60K a year as a restaurant worker. I bought a $50K Genesis G80 on an 84 month loan. I don’t have a large savings account but it’s okay because I can make the payments and business is steady and the boss loves me.

        Now it is 2020 and restaurants are all ordered closed. My boss said they might not be reopening. My Genesis still has 4 years of payments left and I’m upside down on it. I can maybe squeeze by but now I’m in an extremely precarious situation and if I bought a Sonata and financed it for 36 months I’d nearly own it outright.

        For people with many thousands in savings accounts and bitcoins and stocks then yes, 84 months at 0% isn’t likely to be any issue. But if the allure of an equal payment with a longer term gets you to max your budget out then that’s a problem.

        • 0 avatar
          krhodes1

          That’s a different issue. You never should have bought a car that cost 83% of your annual income(!) to start with, no matter how low the payment is. Especially with minimal savings. I didn’t buy my first new BMW until it was less than 40% of a year’s income – and even at that it felt like one HECK of a stretch when I signed those papers. I still paid it off in 3.5yrs.

          This is the insidious part of being a payment shopper.

          Ultimately, long-term loans are just another financial tool. They can be used wisely, or they can be abused.

        • 0 avatar
          jalop1991

          “It’s 2017 and I make $60K a year as a restaurant worker. I bought a $50K Genesis G80…”

          see, the loan type or length isn’t the problem here. Discussing those irrelevancies is like putting a band-aid on a gushing femoral artery.

          The elephant in the room is the insanity of a $60K/year restaurant worker thinking that his extra-fragile income from an industry that is VERY well known for being in flux is any kind of real money whatsoever, let alone enough to support a $50K car.

          Having a food service job for a week that paid you $1153 does not mean you had a $60K/year job.

          • 0 avatar
            bobbysirhan

            Silly taxpayer, thinking any aspect of his life could match that of the people who take their cut at gunpoint for cradle-to-grave job-security and benefits.

          • 0 avatar
            ajla

            How is the length of the loan irrelevant? It is what made him able to purchase a more expensive vehicle in the first place and likely helped greatly in the upsale.

            This guy came into the Hyundai dealer as a “payment buyer” looking at Sonatas and planning to spend “up to” $500 a month. The salesperson showed him how he could get into a fancy V8 Genesis for “less than $100 more a month”.

            Many captive finance arms will leverage people to the moon if their credit score is decent and salespeople aren’t going to recommend you reel it in.

            For the people that are shopping on payments, a very long loan term can get them into big trouble.

      • 0 avatar
        Lou_BC

        “When the rate is zero percent, WHO CARES!??”

        Ford Canada was offering huge discounts on left over 2019’s and even 2020’s. once the whole zero percent thing rolled out, discounts dropped around $5k.
        I’ve seen this before with FCA stuff. GM is offering cheap financing with virtually zero discounts. They are getting their interest one way or the other.

    • 0 avatar
      thegamper

      Trucks actually have a pretty good resale generally speaking, so as a vehicle segment, it is probably the best for long term loans. Most will probably have equity somewhere after year 4 or 5. I think the real issue people should be asking instead of “should I be taking out a 7 year loan” should be, “is this really worth THIS MUCH or am I being suckered into buying a vehicle by the pound at 100% profit with the automakers laughing all the way to the bank.”

    • 0 avatar
      Luke42

      @Honda1:
      “Very foolish to finance a car/truck for 84 months, or even 72, ESPECIALLY A GM VEHICLE. 48 months should be the max allowed.”

      So, what should the maximum term be?

      The answer I’ve come up with is that a new vehicle should never be financed for a period longer than its powertrain warranty.

      That way, you’re guaranteed to be able to get to work for a price you agreed to for as long as you’re on the hook for the money.

      In addition, its important to look at the total interest cost over the life of the loan and make sure that’s worth it. Is a car worth more now that money is worth later? Everyone’s answer and situation is different, but it’s a question which must be asked.

      An 84-month loan had better come with an 84-month warranty, both in terms of miles and months. And the interest shouldn’t cost more than you’d be willing to pay if you were going to write a check for it today.

      This rule accounts for many more changes in the car world than a flat “more than X months is bad” rule. As cars last longer and interest rates fluctuate, the decision parameters change. The definition of foolishness should take these into account.

      • 0 avatar
        krhodes1

        That has long been my rule of thumb as well for a very long time – if I can’t pay it off comfortably within the warranty terms, then I can’t afford it. I’m actually tougher about it – for me it’s the B2B warranty – I paid off my ’17 GTI in the three years that the B2B covered. Payments or repairs, never both on the same car!

        That said, I still will take the longest loan term that has a reasonable interest rate. I value the flexibility of the lower *required* payments – I use the “pay myself first” method of saving, so occasionally it’s nice to have the flexibility to make a smaller payment this month because of some unexpected expense without having to dip into savings that month. My car payments come out of the “below the savings” amount of my pay.

    • 0 avatar
      FreedMike

      Lord, do I get sick of these “you have to finance cars the way I do or you’re an idiot” posts. Give me a break. Do what’s right for you, and let everyone else do what’s right for them. If they fail, it ain’t your problem.

      The retort here, of course, is “failed loans cost me more money.” That’s correct. But then again, plenty of failed loans come from people who, from the look of it, were solid when they were financed. Things change. Things can change for you, too.

      • 0 avatar
        bobbysirhan

        If you think people should be free to make their own decisions, why do you get upset about my politics? You don’t know what you’re a party to, do you?

  • avatar
    SCE to AUX

    84-month loans are sought by people who can’t afford a 48- or 60-month loan, which means even 0% loans are a risk for the bank. Adding some interest back into them isn’t a bad thing.

    Unfortunately, offering such loans on the most expensive vehicles only compounds the problem for banks and consumers alike.

    • 0 avatar
      jack4x

      At 0%, I would be seeking an 84 month loan even if I could pay the balance in cash.

      • 0 avatar
        SCE to AUX

        You’re saying that because 0% is a nice discount (maybe 15% with today’s low inflation), but if you paid according to the loan schedule you’d be upside down for 5 years of the loan.

        I prefer to pay off a depreciating asset ASAP.

        • 0 avatar
          jack4x

          Being underwater is not bad in itself. Failing to plan ahead for the possibility of needing to call in the note, whether through gap insurance or keeping liquid reserves is bad.

          Similarly, whether an asset is depreciating or not shouldn’t make a difference in whether you pay it off sooner. The car will depreciate at the same rate whether you own it outright or finance. Paying early on a low interest loan is simply sacrificing potential returns on the money elsewhere for a feeling of security in not having the debt. Only you can decide if that tradeoff is worth it in your case.

          • 0 avatar
            krhodes1

            I refuse to be underwater on a vehicle, and I *freely* admit it is both irrational and in many cases today financially stupid to even worry about it. But I had the good fun of having to get rid of a car I was underwater on due to a job loss almost 20 years ago (bailed out by the 1st Bank of the Old Man, and paid back with interest – nothing sucks like making payments on a car you no longer have). And I can afford to be a little financially stupid now and again. :-)

            I also just paid off my Fiata after only 15 months, and given I had a 2.5% note that pained me. Needed to for an upcoming real estate deal – darned debt to income requirements on investment property meant that $500/mo payment needed to go away. But better than having to sell investments to buy it and realize gains and pay taxes on it (and not as much gain as it should be since the market is still down). But if anything happens where I need a bunch of cash in the very short term, I can drop by CarMax and walk away with a big check, so no big thing. A nominally 2yo car with 5K on it is right up their alley.

        • 0 avatar
          krhodes1

          From an accounting perspective, that is an idiotic way to look at it. A car isn’t simply “depreciating”, you are using up it’s useful life. So matching the ongoing cost of the car to that useful life is actually a much smarter thing to do, when the cost of funds is negative (or even just less than the inflation rate). A 0% loan, all else being equal*, is effectively PAYING you to take their money – due to inflation, a dollar today is worth significantly more than a dollar at the end of the loan term. GAP insurance mitigates the risk of a loss, and is available quite cheaply with many car insurance policies. So as long as you are sure you are going to want to keep the car most of the length of the loan, the smart money is on taking the long loan.

          *I fully realize things are never equal, and inevitably these finance deals come with a significant loss of discount on the price in most cases. And of course, nobody knows the future, so I won’t owe money on a car out of warranty (I’d still take the longer loan period, but I’ll pay it off when the warranty ends). But that has nothing to do with it being a “depreciating asset”.

          Spreading the cost of the car over it’s useful life let’s you do more useful things with the money in the meantime.

          • 0 avatar
            Arthur Dailey

            Agree with using your calculator in advance.

            I negotiated a price on a vehicle from a manufacturer offering 0% for 7 years. The car came with a 5 year, 100k warranty. So I knew it would be out of warranty early in my 5th year of ownership.

            I went in knowing my maximum budget both overall and for monthly payments. And refused any suggestions to pay just a bit more for a higher end model or more options.

            The car is now in year 9 and may be worth $1k as a trade.

            But I took the money that I could have spent to pay it down sooner and invested it in the kids’ RESPs (to which the government makes an automatic 20% matching contribution) and in my RSP for my retirement. Which then triggered a considerable tax refund. The RESP has since been cashed to pay for kids’ education and the RSP is still invested in safe investments, growing slowly for my retirement.

            If I had made a large downpayment on the car or paid it off in 3 or 4 years, I would not have had the same amount of cash to make these investments.

            Having cost all my cars since 1987 on a per mile/km basis, I have come to the conclusion that unless acquiring a RAV4 or CR-V new at a good price and rate (highly improbable), that it is less expensive per mile in my situation, to lease a similar type of vehicle from a manufacturer more willing to ‘deal’.

      • 0 avatar
        Luke42

        @jack4x:
        “At 0%, I would be seeking an 84 month loan even if I could pay the balance in cash.”

        The times I’ve looked in detail at 0% loan deals, they do effectively charge a fixed interest rate. It’s just hidden elsewhere in the cost of the car.

        The deal is that you usually forgo discounts on the car in exchange for the 0% interest rate. If you do the math, it usually works out to the same amount out-of-pocket as other pretty-good-deal interest-rate.

        That’s not to say a 0% interest rate loan is a bad deal (it’s probably a pretty decent deal). However, the devil is in the details and giving up $1000 in incentives (or whatever) is just another way to charge you for borrowing the money. It’s something you should investigate before signing the deal — especially if you plan to pay off the car early.

        Always read the fine print, with your calculator out.

    • 0 avatar
      Scoutdude

      The banks aren’t selling the money at 0%, the mfg is paying the interest for you, usually instead of a giving you that money as a rebate.

    • 0 avatar
      krhodes1

      They are NOT giving 0% loans to people who are much of any risk. If you don’t have super-prime credit you are NOT getting one.

  • avatar
    socalduck

    Where people get into trouble is when they rollover the unpaid balance from the 60 month note on their old vehicle into the 84 month note for the new ride. And then five years from now, they do it again on the next purchase. Most new car buyers will not hang on to a vehicle for the full 84 months.

  • avatar
    Tele Vision

    I just bought a 2000 GMC Sierra last weekend for our oldest boy. It has the 4.8L and a 4L60E sending torque to a factory LSD rear with 4:10 gears in it.

    CDN$1500.00

    It runs as sweet as a nut and can be fixed with a socket set and a hammer.

    My point is: Old Is Still Good, And It’s Easier To Fix.

    I’ve been buying used cars and maintaining them for 25 years. It’s fun; cheap; instructive; and, if you’re into it as a ‘thing’, good for the environment.

    Pay cash for the car and the tools and you’re ahead of the game.

    • 0 avatar
      krhodes1

      That worked great for me when I had the time, energy, and a place to work on cars, and no money. For many years. Today I don’t have any of those three things, but I have plenty of money. So I buy new cars.

    • 0 avatar
      ktm

      You really need to read the piece (on TTAC) by Jack Baruth: “You gotta be rich to own a cheap car.” It should help to show you the folly of such (buy cheap) sentiment.

      • 0 avatar
        jalop1991

        I’m too poor to buy cheap.

        That being said, you don’t have to be rich to own a cheap used Corolla. You DO have to leave your pride at the door, maybe, and not care about what anyone else thinks and not care that you didn’t (foolishly) pull the trigger on that $50K Genesis just so you could have something to talk about on anonymous web forums.

  • avatar
    Carrera

    My personal rule with financing a vehicle is 60 months maximum. If the payment isn’t comfortable for a 60 months loans, that means I can’t afford the vehicle. Normally, I never put down more than 10-15%. The issue with these 72-84 term loans, in my opinion, is that more than likely, but not always, they’re offered in vehicles that depreciate faster than others. When I buy a vehicle I like to buy with the intention to keep it 7-10 years. Well, that’s the intention but doesn’t always work that way. I always like to keep in mind the “what if” scenario. What if I am not into pick up trucks anymore after 3 years of payments on my 84 month loan? How much upside down am I going to be? Probably a lot unless it is a Tacoma or a Tundra and even then.
    How about if I get over my midlife crisis and after 2 years I realize that I hate rolling out of my Corvette? How much upside down am I going to be on that 84 month loan? It hasn’t happened to me yet since the above scenarios are just that..”what ifs” but I’ve worked with plenty of guys and gals who did exactly what I just used as an example. Sometimes, the trade-in was “just because”, but often times it was out of necessity such as life changing events ( health issues, twins on the way, marriage, divorce). Life can change in an instant and the last thing I want to worry about is my $7,000 upside down loan being rolled over into my next car. Since I can’t afford to buy a new car cash, for now, I find the 60 month loan to be the sweet(er) spot.

    • 0 avatar
      SCE to AUX

      Agree completely.

      This is also why I paid off my second (and current) house as quickly as I could afford to, which was 13.5 years instead of 15, and that included an 8-month layoff only two years into it. My FIL always believed that a house is the best investment because it will always appreciate, but that is not my experience. Corrected for inflation, and accounting for updates, I’d barely break even on my house today, and it’s a decent house in a decent neighborhood.

      In contrast, after 12 years in my first house at 30-year rates of 9.5%, then 7.0%, I sold it having less than 20% equity. I had relatively good income at the time, but the lengthy note and high interest rates worked against me.

      I much prefer the security of minimal net liability, which starts with spending modestly and aggressively paying it off.

      • 0 avatar
        Scoutdude

        While it is true that houses don’t always appreciate, long term they are a good investment, if you buy right and/or buy at the right time they can be a good short term investment too.

        My first house had an interest rate in the 9’s, was purchased with a FHA 2.5% down loan. I owned it for 2 years and walked away with enough cash to put 10% down and pay the closing costs on a house a little more than twice what I paid for the first. There was more money left over than what I had put into the first house too. Then there were tax savings on top of that. Much of that was timing of course, and a little bit of making the house more presentable, cleaning up the overgrown yard, painting a couple of the rooms, and a general spit shine.

        Of course shortly after purchasing that second house appreciation rates leveled off and it took ~6 years to achieve the same percentage of appreciation as I did in two on that first house.

    • 0 avatar
      brettc

      I did 66 months on my TDI wagon, and I don’t plan to do that again. Having a car payment hang over your head that long isn’t a good feeling, especially for an anxious person.

      When VW bought the car back, I had already bought a used car that was paid for immediately. It was a great feeling to be free of car payments.

      • 0 avatar
        Carrera

        Yeah Brettc, 66 months isn’t too bad..if I really love the car, I could see myself do that. Like I said, my personal rule of thumb is..if I am not comfortable with the size of payment for a 60 month loan with 10-15% down, then I can’t afford the vehicle. Of course we all have our threshold. For me, things get a bit weird once they get to $30,000. Honestly, it is more of a psychological threshold not necessarily based on my buying power but it is what it is.

    • 0 avatar
      Scoutdude

      A full size pickup, in a popular configuration has some of the lowest depreciation out there. Yeah you’ll be screwed if you bought a 2wd or a regular cab in my area, but 1/2 ton 4×4 crew cabs are like gold around here. Yeah you’ll be upside down at the start, but you are with any 10-15% down loan. However the 0% means all of the payment goes to principal. So you still make ground on the depreciation front and will be in the green sometime in year two, three at the latest.

      So two options that are better than locking yourself into the higher payment of a 60 month loan. Take the 0% interest and pay extra every month so that it will be paid off in 60 months. That way if things get a little lean one month you can stop paying that extra. Or take that extra money, put it in savings and don’t touch it. You will be making more than 0% and you’ll build up some cash. That cash could be used if things get tight or to make up the difference if you do find yourself upside down and need to make a change.

      Seriously, the 84 month 0% loan can be a good financial decision, if you don’t use it to take home a more expensive vehicle than you would have otherwise. Of course I expect the majority of people do it to be able to take home a more expensive vehicle.

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