The Risk of Car Loans With Long Terms
Car loans are
available for several different loan terms.
Meaning, you can take out a car loan for 24,
36, 48, 60 or even 72 months. The longer the
loan term, the lower your monthly payments
are going to be. Utilizing a car loan of 5
years or more will allow you to purchase a
more expensive car. You may even be able to
buy a new car. However, you will wind up
paying more in interest over the life of the
loan than if you were to apply for a shorter
term loan. Despite this information, the
numbers of individuals that opt for longer
auto loans rises each year.
lenders issuing five and six year loans?
New cars are better manufactured
than they were in the past. Thus, increasing
the average life of automobiles, resulting
in a decrease in the risk in lending. As a
result, lenders are more willing than ever
to increase available loan terms for new car
mentioned, you will wind up paying more in
interest with a financing term that is
longer than shorter. You will also wind up
paying more for maintenance on your car,
i.e. tune-ups, brakes, tires, etc..
like buyers to take out shorter car loans.
It is likely that the car dealer you are
purchasing a car from will try and get you
to commit to a two or three year auto loan
program. A shorter term will mean that your
cash will be freed up quicker, resulting in
you going back to the dealership to buy a
new car sooner than if you took out a longer
What can I expect the difference in
monthly payments to be with a 3, 4, 5, or 6
It would be a good idea to crunch some
numbers in our
auto loan calculator to get a solid
grasp as to what you can expect to pay with
the different loan terms. The average car
loan applicant borrows around $20,000. So a
three year loan at 7% would be $618, four
years $479, five years $396 and six years
$341. As you can see, there is a pretty big
swing in monthly costs as you decrease the
loan term. But the longer the loan, the more
interest you are going to pay.
Selling or trading in a used car after a
five or six year loan.
depreciate in value every year.
After a six year loan, a car will be valued
at about 25% of its new car price. A five
year loan will result in your automobile
being worth approximately 35%. You will get
very little return for your investment when
the time comes to sell or trade-in your
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