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Is a 72- or 84-Month Car Loan a Bad Idea?
Six- and seven-year car loans have become common because they make a car's monthly payment look affordable. The catch is what they cost in total, and how long you owe more than the car is worth.
Short answer: a 72- or 84-month loan lowers your payment but adds thousands in interest and keeps you "underwater" on the loan for years. It can make sense at a very low promotional APR, or if you'll keep the car for a long time and can pay extra when money allows. For most buyers, a 48- or 60-month loan on a cheaper car is the better deal.
Payment vs. total interest
Here's a $35,000 car with $5,000 down, 7% sales tax and $1,500 in fees rolled into the loan, at 6.5% APR. The amount financed is $33,950.
| Loan length | Monthly payment | Total interest |
|---|---|---|
| 36 months (3 years) | $1,040.53 | $3,509 |
| 48 months (4 years) | $805.12 | $4,696 |
| 60 months (5 years) | $664.27 | $5,906 |
| 72 months (6 years) | $570.70 | $7,140 |
| 84 months (7 years) | $504.14 | $8,398 |
Going from 60 to 84 months drops the payment by $160.13 a month, but adds $2,491 in interest. Compared with a 48-month loan, the 84-month loan costs $3,702 more.
Longer loans often come with higher rates
The table above uses the same APR for every term, which flatters the long loans. Lenders often charge more for longer terms, because the loan is riskier for them. If the 84-month loan came at 8.5% instead of 6.5%, the payment would be $537.65 and the total interest $11,212. That's $6,517 more than the 48-month loan, for the same car. Ask lenders for their rate at each term, not just the longest.
The bigger risk: owing more than the car is worth
A long loan pays the balance down slowly, while cars lose value fastest in their first few years. After two years, the 48-month loan above is down to $18,074. The 84-month loan still has $25,766 left, and after three years it's at $21,258.
If you owe more than the car is worth, that's negative equity, and it causes problems if anything changes. If the car is totaled or stolen, insurance pays its value, not your balance, so you could owe money on a car you no longer have. Gap insurance covers that difference. If you want to trade the car in, the shortfall usually gets rolled into your next loan, which starts you even further behind.
When a long loan can make sense
- The APR is very low. At a promotional rate near 0%, a longer term costs little extra interest, and you keep more cash on hand.
- You'll keep the car past the loan. Negative equity only hurts if you sell, trade or total the car while you're underwater.
- You'll pay extra when you can. A long loan with a low required payment, paid down faster on purpose, gives you flexibility. Check there's no prepayment penalty.
If the only way a car fits your budget is a seven-year loan, that's usually a sign the car costs too much for the budget. The affordability calculator shows what price fits a shorter loan, and the affordability guide explains the 20/4/10 rule behind it.
Try it with your own numbers: Auto loan calculator →
Figures in this guide come from the same code that runs the calculators. They're estimates, not financial advice; your lender's numbers are final. How the calculators work.
More guides
- How Auto Loan Interest WorksWhy early payments are mostly interest, how APR and loan length change what you pay, and how extra payments cut interest.
- How Much Should You Put Down on a Car?How 0%, 10% and 20% down change your payment, interest and loan balance, and when a smaller down payment makes sense.
- Does a Trade-In Lower Your Sales Tax?Most states tax only the difference after a trade-in, but several don’t. The states that differ, with worked examples.
- How Much Car Can I Afford?The 20/4/10 rule explained with real numbers, plus how loan length and other car costs change what your income supports.
- When Does Refinancing a Car Loan Make Sense?How to tell whether a refinance saves money: rate drop, fees, break-even month, and the trap of stretching the loan.