Drawbacks of taking a long term loan

mok95

Hi there,

I am considering to buy a car. I know I will probably want to change it in about 2 years time. I have looked at the following two scenarios:

1. Take out a personal lease on a new car worth £32,000 (3+23 payments)
Diposit: £1,500
23 payments of: £475
Cost over 2 years = £12,350

2. Take out a loan on the same car, but 3months old, worth £28,000
Diposit: £3,000
Loan to take: £25,000
Term: 10 years
Monthly repayment: less than £300
Interest: 7%

In two years time
Paid (including interest): £7,200
Balance outstanding: ~£18,300
Car worth: more than £20,000

Cost over 2 years = ~£8,500

The idea is taking a long term loan to keep monthly payments low, and then cancel it when I sell the car back. Also, by buying the car just a few months old, much of the initial depreciation should have taken place already.

My question is what do you think are the downsides of this approach? What are the negative aspects of having such a high value long term loan?

Thanks in advance!