What do you think, is a 7 year loan on a new A3 a bad idea?

I can get a APR of 5.5 from my credit union on the 7 year loan. This is 1.2 point higher than the 5 year loan.

I don't really mind the extra interest rate, but my worry is the depreciation of the car during the first couple years. It I got into a situation were I needed to sell it I could owe a lot more on the loan that what the car is worth.

How do think the A3 resale value is going to hold up? Audi got me worried about this because they have such a low residual value on the lease.

Thanks for your input.
Bjorn

A 7 year loan is a bad idea IMHO. Why pay the extra interest and be locked into the car longer due to depreciation and high payoff?

If you can afford to buy the car in less time, do so for the shortest period you're comfortable with and in the meantime put the money into something that APPRECIATES rather depreciates. The sooner you're out of debt, the sooner you can channel all of your resources into other appreciating assets.

I paid off my Alfa in 3 years, and then had 12 years of no car payments. That's a nice feeling and gave me a lot of flexiability when making other choices in my life.

IMHO, the cheapest car is the one you'll keep the longest. Make sure you really want whatever car you buy, and then keep it for at least 5 years to 8 years/150K miles.

Conventional wisdom is that if you can't pay off a car in 3 years, then you can't afford it. Try to get the shortest loan possible.

<center><img src="http://pictureposter.audiworld.com/63004/pc280028.jpg"></center><p>we ended up paying them off early because we would send more than minimum when possible. The real key for us was large down payments. (I know...hard to do for most of us) But our last purchase was a 50% down, financed remaining 50% through Audi (.35% better rate than the Credit union) over 5 years. The car we feel will be fully paid off no more than 4 years, we have a car payment less than lease payments. 7 years? Low down? Oooof! That's scary.

Or better yet put the money into property.

For same reason people lease. With car prices constantly shooting upwards, it's the only way to make the monthlies palatable. But then you're upside down almost the whole time you have the car, and when you're done it's WAY out of warranty and not worth much at all.

... the value of the dollar drops every year as your earning power goes up. For instance, say you are earning $50,000 a year in 2005 and get a raise every year at work. Say your car payments are $400 a month. Well, by the later years of your loan your salary will have increased signficantly (hopefully) and $400 won't be as difficult to pay as it did in the first years of your loan. With that in mind, you might be able to make extra payments and pay off your loan early.

With my last two Audis, I took out 5-year loans just to get smaller payments, then paid them both off early as my salary increased.
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