What happens after "3.9% APR Financing for 36 Months"?

Question

I have recently seen many car dealers with ads that say "3.9% APR Financing for 36 Months" and similar. Supposing I get a 5-year auto loan, what happens after the 36 months? I can't find anywhere in the advertisement's fine print any details about what happens after that. Is this a trick to get people on 3.9% for 36 months, then it becomes something ridiculous, like 25% after that?

Answer 1

Usually, what it means is that the 3.9% APR is offered for a loan with the given term. I.e.: if you get a 5 year auto loan, it would have a different APR, not the 3.9% advertised. If you want the 3.9% advertised APR - you'll need to get the 36 months loan it is advertised for.

Answer 2

I have recently seen many car dealers with ads that say "3.9% APR Financing for 36 Months" and similar.

That phrasing x% for Y months is typical of car dealers, banks , and lenders. They are telling you the major facts of the deal. You will pay back all the loaned amount in those Y months. They will charge you at a rate of X percent on an annual basis.

Supposing I get a 5-year auto loan, what happens after the 36 months?

If you get a 5 year (60 month) loan they will charge a different rate than x%. It could be mentioned elsewhere on the sign. or they could have a rate table. They may have other rates listed 1 year, two year, 7 year...

I can't find anywhere in the advertisement's fine print any details about what happens after that. Is this a trick to get people on 3.9% for 36 months, then it becomes something ridiculous, like 25% after that?

Most auto loans in the US are designed to have you pay the same rate for the entire loan. The monthly payment is fixed, and is set such that the loan will be completely paid off with that final payment of the agreed to term. That means the 37th payment is exactly equal to all the others.

Please do read the fine print related to any loan you see advertised. That fine print gives very important details. They may require a good credit score, if yours is too low the rate will be higher. They may require that the down payment be a fixed $ amount or higher, and at least Z% of the purchase price.

Whenever you are looking for a car loan, it is always best to start at your bank and credit union. You can ask all the questions you want. They can explain your options, and exactly maximum amount you can borrow based on your situation.

All of this is easier to understand without being in a high pressure situation where you are also negotiating price and trade-in value.

It is possible the dealership has a better deal, but if you wait to you get to the dealer before thinking about your loan options it is easy to make a mistake.

Answer 3

I have recently seen many car dealers with ads that say "3.9% APR Financing for 36 Months" and similar.

Yes, quite common. Fixed-rate APRs are generally assumed unless otherwise specified.

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Supposing I get a 5-year auto loan, what happens after the 36 months?

Your 5-year loan would have a set APR.

The advertised 36-month APR is irrelevant.

Is there a chance that a 5-year loan will have the same APR as a 3-year loan? Sure!

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I can't find anywhere in the advertisement's fine print any details about what happens after that.

After 36 months, the loan should be 100% paid-off. You will get a letter from the bank declaring that your loan is satisfied.

If you haven't paid the loan off by this time then you must have missed payments or something.

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Is this a trick to get people on 3.9% for 36 months, then it becomes something ridiculous, like 25% after that?

If you make on-time payments then this is not a concern. You would have to perform a contract-breaking action such as missing a payment to activate any sort of APR-ballooning clause.

Variable-rate APRs will usually be advertised something like this:

3.9% for the first 36 months!

or

3.9% Introductory APR!

By the way, variable-rate APRs are perfectly legal. Loan-sharks love to finance people who don't understand the difference between fixed and variable rate.