But of course, I am assuming that the borrower can get a loan at 5%. Despite the "come on" loan rates being bandied about by the car makers, most folks, even with good credit, are going to pay about that much for a five-year loan. A seven-year loan for someone with bad credit could cost more. And even small increases in interest rates make big changes in the paydown rate.
They bought a new BMW which had a four-year warranty, but paid for it on a five year note. After four years, it needs $1500 worth of tires, and maybe a brake job and a host of other repairs, which if done at the dealer, could cost thousands of dollars. And the owner realizes he is still making payments on the car, which is now worth less than half what they paid for it. So they go on a BMW discussion group and bash BMWs as unreliable.
And this could even be worse for Ford, whose cars depreciate even faster and are far less reliable than BMW. As a result, a buyer could find himself making payments on a car that is long out of warranty that also requires thousands in repairs.
In the olden days, car loans were paid off long before this situation occurred.
So I see where Bill Ford is coming from. Seven year car loans are bad for business on a number of levels. And bad for our country. And needless to say, bad for the individual.
If you are looking at a seven-year car loan, chances are it means you really can't afford the car. Look at a cheaper car and a shorter-term loan instead. Or better yet, buy secondhand and pay cash.