What Is the Longest Car Loan Length?

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The longer your car loan, the lower your monthly payments will be. But is a lengthier loan worth it?

If you’re car shopping on a budget, you’re not alone. According to Statista data, more than 81% of new vehicles purchased in the U.S. were financed. When you finance a car, the car loan length can range from 36-120 months.

To avoid being stuck with high monthly car payments, many borrowers take out long car loans to spread out the cost of their vehicle. But is this the best strategy for saving money? Though longer loan terms might provide some financial relief in the short term, are they worth it in the long run?

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Understanding Car Loan Length

The length of a car loan is the amount of time you have to pay off your loan in full. It can impact the monthly payments and the interest rate you’ll pay. Typically, lenders offer lower interest rates on short car loans since there’s less risk of default.

On the other hand, longer loan terms come with higher interest rates because the lender is taking on more risk. Though short auto loans might have lower interest rates, the monthly payments are higher since the total loan balance is spread out over less time. In comparison, a long car loan gives you more breathing room in your monthly budget.

Here are the most common loan terms offered by lenders:

  • 36 months (three years)
  • 48 months (four years)
  • 60 months (five years)
  • 72 months (six years)
  • 84 months (seven years)
  • 96 months (eight years)
  • 108 months (nine years)
  • 120 months (ten years)

According to Edmunds, many car buyers gravitate toward longer loan terms — 72 months or more — because of the low monthly payments. In the first quarter of 2022, more than 70% of car loans were longer than 60 months.

Keep in mind that though you can technically take out a loan for longer than ten years, it’s not recommended. The reason is that cars depreciate quickly. After just a few years, your car will be worth far less than what you paid. A 2020 study by iSeeCars, an automotive research firm, found that the average new car depreciation is 49.1% after five years of ownership.

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Pros and Cons of Longer Loan Terms

According to Experian’s latest quarterly report, longer car loans have become increasingly popular in the past few years. Though it can be tempting to stretch out your loan payments over a more extended time, there are pros and cons to consider before making your final decision.

Pros

Let’s examine the pros:

Lower monthly payments: This is perhaps the most obvious benefit of opting for a longer loan term. When you stretch out your payments over a longer time frame, your monthly bill will be lower, making it easier to afford your car payments each month.

More time to repay your loans: A longer loan term also gives you more time to repay your loans, which can take some weight off your shoulders if you’re on a tight budget. You won’t have to worry about making a large lump sum payment all at once. Instead, you can spread out your payments over a longer period.

More flexibility in your monthly budget: A longer loan term also gives you more flexibility in your monthly budget because you can allocate more money toward other financial goals.

Can afford a more expensive car: Since monthly payments are lower with longer loan terms, you can most likely afford to finance a higher-quality car. That means you can get all the bells and whistles you want instead of settling for a stripped-down model.

All of that sounds pretty good, doesn’t it? Now, let’s consider the cons.

Cons

The cons include:

Higher life-of-loan interest: You could end up paying hundreds or even thousands of dollars more in interest by stretching out your loan. Let’s say you finance a $25,000 new car at 6% interest and pay a $5,000 down payment; here’s how the numbers would look at different loan lengths:

  • 36 months: Monthly payments: $608. Total loan interest: $1,904.
  • 48 months: Monthly payments: $470. Total loan interest: $2,546.
  • 60 months: Monthly payments: $387. Total loan interest: $3,199.
  • 72 months: Monthly payments: $331. Total loan interest: $3,865.
  • 84 months: Monthly payments: $292. Total loan interest: $4,542.

The difference between a 3-year loan and a 7-year loan is almost $3,000 in interest payments. And that’s not taking into consideration the higher interest rates that come with longer loan terms.

Risk of going ‘upside down’: Another downside of longer loans is that you’re more likely to go “upside down” — owing more than the car is worth. This can happen if the car depreciates more quickly than expected or if you have an accident and the insurance doesn’t cover the car’s total value.

And when you have negative equity in your vehicle,  you could find yourself in a tricky financial situation if you need to sell or trade in the car before the total loan amount is paid off.

Your financial situation can change over the life of the loan: If you lose your job or have an unexpected medical expense, it can be tough to keep up with your car payments. So before you opt for a longer loan, make sure you’re prepared for any potential bumps in the road.

Now, you might not be quite as sold on a longer car loan term after reading through this list of cons as you originally thought.

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Short-Term vs. Long-Term Car Loan: Which Is Better?

So which is better? Short-term car loans or long-term car loans? Well, each has its pros and cons. In general, you might want to stick to a car loan that’s as short as you can comfortably afford.

The longer your car loan, the more the total loan will cost you in interest payments. But if you can’t afford the higher monthly payments of a shorter loan, then a longer loan might make more financial sense for you.

Whichever route you choose, just make sure to do your research, look for a reputable dealership, and shop around for the best rates before you sign on the dotted line.

Ways to Avoid 72-Month Loan or 84-Month Car Loan

In the first quarter of 2022, the average auto loan amount reached $39,540, with an average monthly payment of $648. Without a doubt, car loans can be a huge commitment. And if you’re not careful, this extra expense can quickly put a dent in your wallet. So here are four ways to avoid costly long-term auto loans.

1. Lease instead of buy

If you’re not committed to owning a car outright, leasing can be a great option. You’ll have lower monthly payments and avoid the risk of being upside down on your loan. Plus, you can get a new vehicle every few years without worrying about reselling it — perfect if you like to stay up-to-date with the latest trends.

2. Get a less expensive car

This one is pretty self-explanatory. The cheaper the car, the smaller the loan you’ll need to finance it. You can also save money by choosing a used car instead of a new one.

Used vehicles might have some mileage, but they’re usually cheaper than their brand-new counterparts. Be sure to do your research, check the car’s history, take a test drive, and negotiate before making the purchase.

3. Consider having a cosigner

If you have bad credit or no credit history, getting someone with good credit to cosign your loan can help you qualify for a better interest rate. Just be sure you’re prepared to make all of the payments on time, since missed payments can damage your credit and your relationship with your cosigner.

4. Make a larger down payment

Putting more money down upfront will reduce the amount you need to finance and might help you qualify for a lower interest rate. Plus, it’ll shorten the length of your loan, which means less overall interest paid.

In general, you should try to put down at least 20% of the car’s purchase price to get the best deals on rates. If you can afford it, you can put down even more to lower your total loan cost.

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How to Get Out of a Long-Term Car Loan?

Making more than the monthly car payment is the most obvious way to get out of a long-term auto loan early. You can accelerate your payments by making bi-weekly payments instead of monthly payments.

Just make sure to check with your lender first to see if there’s any prepayment penalty. Some lenders might charge up to 2% of your remaining loan balance if you pay off your loan early.

If you have good credit, you might be able to refinance your long-term auto loan and get a shorter-term loan with a lower interest rate. This will save you money on interest charges and help you pay off your loan faster.

Take Control of Your Auto Loan!

If you’ve already entered into a long auto loan term, it’s not all doom and gloom! You can look into making more than your monthly payment to pay off your car early or consider refinancing to save on hefty interest charges.

Of course, whether this latter option is available will depend on your credit score and other factors, so be sure to speak with a qualified financial advisor before making any decisions. In the meantime, use an auto refinance calculator to estimate how much money you could save by refinancing your current car loan.

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About The Author


Jamela Adam

Jamela Adam is a personal finance writer covering topics such as savings, mortgages, investing, student loans, and more. Her work has appeared on Clever Girl Finance, Chime, SuperMoney, and Mint Intuit, among other publications.


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