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The Truth About 72 Month Car Loans
The Truth About 72 Month Car Loans

The Truth About 72 Month Car Loans

April 9, 2022

When it comes to loan terms for a given amount, the longer the loan, the lower the monthly payment. However, interest, which is the cost to borrow money, is charged on virtually all loans – expressed as an annual percentage rate (APR). Due to the way interest is charged, the longer your loan term is, the more expensive the loan becomes.

It’s tempting to sign the dotted line on a 72-month or 84-month auto loan when you see the monthly payment plummet into a much more reasonable range. Going from 60 months to 84 months on a $35,000 car can turn a $650 car payment into a sub-$500 payment. Sweet! Right?

Auto loans over 60 months are not the best way to finance a car because, for one thing, they carry higher car loan interest rates. Yet 39% of new-car buyers in the first quarter of 2021 took out loans of 61 to 72 months, according to Experian. More alarmingly, Experian’s data shows 32% of car shoppers are signing loans for between 73 and 84 months — that’s from six to seven years, folks.

“To close the deal, [car dealers] need to offer a payment that is comfortable,” Weintraub says. “Instead of reducing the sale price of the car, they extend the loan.” However, he adds that most dealers probably don’t reveal how that can change the interest rate and create other long-term financial problems for the buyer.

Used-car financing is following a similar pattern, with potentially worse results. Experian reveals that 42.1% of used-car shoppers are taking 61- to 72-month loans while 23% go even longer, financing between 73 and 84 months.

If you bought a 3-year-old car, and took out an 84-month loan, it would be 10 years old when the loan was finally paid off. Try to imagine how you’d feel still making loan payments on a 10-year-old car.

Long loan terms are yet another tool the dealer has to put you into a car because they focus you on the monthly payment, not the overall cost. But, just because you could qualify for these long loans doesn’t mean you should take them.

But should you go for 72- or 84-month auto loans? There are drawbacks to consider with long-term auto loans, even with low, or no, interest.

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