As auto prices spiral consumers are financing their cars over longer periods to keep monthly paymentsto a minimum.
that strategy often is financially shortsighted,though.Although extended the length of a car loan can slash monthly payments,it invariably will boost total payments.
" Borrowers who focus on the size of the monthly payments often don't realize how much they'll pay in interest," says Susan Tiffany,editor of " Everybody's Money," a consumer magazine published by Credit Union National associations.
For example,suppose you got a three-year,$ 12,000 loan with an annual interest rate of 8 percent.Your monthly payment would be $ 376,with interest totaling $ 1,537 over the loan's life.
If you extended the loan to five years,your monthly payments would drop to $ 2,599.
Is the lower monthly payments really worth an extra $ 1,062 in interest?
" Each buyer has to look at his or her needs," Ms.Tiffany said." But don't make the decision blindly.Consider what you could buy with the money you save by repaying your loan over a shorter period."