Judul : Longer Vehicle Loan Tenor, Various Side Effects Will Occur?
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Longer Vehicle Loan Tenor, Various Side Effects Will Occur?
Oleh Amidi
Credit purchase is a common practice among the community or consumers, and it is indeed facilitated by producers, sellers, or financing institutions (leasing). With the existence of a credit sales system, it provides consumers with broader opportunities to own a certain item.
In its development, the credit sales system has spread to various products. If before, credit sales were only available for certain products, such as automotive (cars/motorcycles), but now, almost all products can be bought on credit.
With the availability of credit sales, it will promote an increase in sales volume. For example, car credits: before the existence of credit sales, a car dealer could only sell a few cars per month, but after implementing the credit system, monthly sales will continue to increase.
But, sellers, dealers, or leasing companies, apparently it is not enough to achieve an increase in sales volume with the presence of a short-term credit system (1-3 years). Now they are competing to apply long-term or longer terms, some up to 5 years, and some have already set an 8-year term.
Positive/Negative Effects!
A longer or extended tenor will certainly benefit both parties. From the consumer's side, the installments paid by the consumer will be lighter, the consumer or society will have a great opportunity to own a vehicle, and the consumer can more freely manage their finances. From the seller/dealer/leasing side, they will obviously gain more profit and there will be a significant increase in sales volume.
Then, for consumers with longer or longer credit terms, it does provide convenience for consumers to own a product or vehicle (car). If the car is used for work convenience or going to and from the office, it will support or create enthusiasm for work, because they are not hindered from going to the office or workplace when it rains, without getting a cold and others.
For consumers from the business community, the car can be used for business, can be used to support the smooth running of the business, and can be used to earn money (go car).
However, behind all of this, both parties will also suffer losses. On the consumer side, consumers will inevitably have to buy cars at a much higher price. Just simply calculated, the price could reach two or three times the cash price. Furthermore, it is not unlikely that loan defaults may occur, especially for consumers with fluctuating and/or non-permanent income, and there is a possibility that the vehicle (car) will be repossessed by the dealer/leasing company due to delayed payments or loan defaults.
On the seller/ dealer/ leasing side, the potential credit default risk will be higher, because of the relatively longer tenor, there will be intense competition among financing institutions (banks/leasing) and credit management in the financing institutions must work hard to ensure that consumers' monthly installments run smoothly.
Then, it's not only that, there are other positive and negative impacts that consumers still have to face. For example, consumers seem to be chased by debts, especially if they decide to buy a car on credit without careful consideration. Thus, they will not feel at ease when the due date arrives, which will eventually interfere with their performance (if they are workers) or if they are entrepreneurs, they will be chased by debts that will affect their enthusiasm for business.
Long Term Excess
With the implementation of longer tenor, various side effects will arise. With the increasing ease of owning a vehicle (car), the number of vehicles (cars) continues to increase (pile up), roads become more chaotic and congested, random parking will occur in alleys (for those who do not have a garage), parking on the roadside, and parking anywhere.
For consumers who are workers, it will encourage them to be lazy at work, if their income is spent on paying credits or most of their income is taken up by credit payments, and potential negative actions will arise in order to pay the installments.
How Should It Be?
In responding to the offer from dealers and/or financing institutions (banks/leasing), consumers must be wise, think carefully, and prioritize rationality rather than emotion.
Indeed, the longer tenor is a great opportunity for consumers to own a vehicle (car), especially since dealers and/or financing institutions (banks/leasing) are actively promoting the ownership of vehicles on credit with this longer tenor.
No wonder, if they put up banners, posters, and other forms of advertisements that entice consumers by offering longer credit terms. They will try to attract as many consumers as possible. Officers, salespeople, or sales staff will even guide consumers to buy on credit, so they can gain more profit from credit sales.
My experience when I wanted to buy a motorcycle for my son twenty years ago, (sorry) I was going to buy it in cash (cash). When I was already at the motorcycle dealer who had the brand, even included in one of the top brands, the salesperson asked about the payment method, "Sir, do you want to pay cash or installment?" I answered, I want to buy it in cash. The salesperson tried to persuade me, "Sir, better to buy it on installment!" I replied again, no! I want to buy it in cash.
Similarly, when I was at the cashier, the cashier staff once again questioned the payment issue, cash or credit. This is the reality, this is the developing phenomenon.
It means that if the consumer buys in cash, their side will benefit, because many parties will be involved: the seller, the dealer, the leasing company, the insurance company, the bank, the officer and others will benefit if the consumer buys on credit.
In this case, the consumer's decision, if tempted by such temptation or persuasion, may lead the consumer who originally intended to buy in cash to switch to buying on credit.
Once again, when considering that the sale on credit involves many parties, therefore, the more consumers or society buy on credit, the more parties will benefit.
Once again, in dealing with credit sales with longer terms, consumers or the public must truly consider their financial condition, financial security, income stability, and above all, take into account the risks that may occur in the future, including risks related to the vehicle (car) purchased on credit.
From the selling price perspective, it is clear that the vehicle we are going to resell has a lower price, especially vehicles bought on credit with a longer term, which indicates that the usage period of the vehicle will be longer, thus reducing the selling price. A vehicle purchased on credit can only be sold if its credit has been fully paid.
Sorry, not to lecture! Isn't it better, if consumers or the public want to buy on credit, to take a short term, for example 1-3 years, and if possible, even a very short term, for example 1 year.
The shorter the term, the smaller the interest to be paid, and the purchase price is not as expensive if the consumer takes a longer term, for example 5-8 years.
Then, if possible, we can save money, it's better to save first. Once we have accumulated an amount of money according to the cash price of the vehicle we want to buy, then we can buy the vehicle. Good luck in your consideration!!!!!!!
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