Wave a Solemn Goodbye to Cheap 84-month Loans, Shoppers
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]
More by Steph Willems
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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.
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.
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.
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.