I saw this recent article about how having a car loan for 7 years. I like the poll at the end of the article: “Would you pay $1,600 more over a seven-year period to get a 50% lower monthly payment now?” The chart shows that for a 3 year loan you would pay $588 a month, and for a 7 year loan it would be $271 a month. The seven-year loan means that you are only paying an additional $1600 in interest. I am never one to pay interest if I do not have to, but it is nice to know that you could have a more affordable payment for a longer term.
The question that they bring up at the end, which I think is also worth thinking about, is if you wanted to sell your car in 5 years, and had a 7 year loan, then likely you will owe more than the car is worth. That is definitely something to think about and research. I like that it is possible in their more financial tight times. Having said that, I like it with one caveat. If the car you are purchasing is to ritzy and expensive that you have to go for the 7 year loan. To me then it is not worth it. If you are stretching yourself for the visibility of a luxury car, then you should buy a less expensive car.
I guess it depends on how you choose to spend your money, your interest rate, how long you drive your car (in years), how long you drive your car each day, and your thoughts on putting your income into your car. Suze Orman would tell you to get rid of the car payment completely. She would likely say if you are making less on the money you are putting away (separate from 401ks, 403bs, and IRAs) than you are paying for a car loan, then pay off your car loan. If you can make more on the money you invest than the car loan interest rate, then keep your car loan. Look to where you make more for your money.
What do you think?