Is 60 months too long for a car payment? (2024)

Is 60 months too long for a car payment?

NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months. These maximums can help you avoid some of the negative outcomes of long-term loans.

Is 60 month car payment bad?

Overall, if you're choosing between the two, a 60-month loan is better because you'll pay off the loan faster with a lower interest rate, and you'd be paying less overall for your car. If you'd like to make more auto loan comparisons, this article on common car loan terms can help.

What is the best term length for a car payment?

NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars — although that can be a challenge for some people in today's market with high car prices. Ultimately, choosing the best auto loan term depends on balancing cost, affordability and your specific needs.

Is 6 years a long time for a car payment?

The most common length is 72 months—or six years—followed by 84 months. The longer your loan term, the lower your monthly payments, but the higher the overall interest. Shorter terms, on the other hand, mean higher monthly payments, but you'll pay off your car sooner and owe less interest.

How many months is good for a car payment?

The most common terms are 60 and 72 months, but 84-month terms are becoming more common. There is no perfect term, and it is instead specific to your budget and needs. A longer term means lower monthly payments but a higher cost overall.

What is a realistic monthly car payment?

Use your annual income as a starting point to calculate how much car you can afford based on monthly payments. Financial experts recommend spending no more than about 10% to 15% of your monthly take-home pay on an auto loan payment.

What is the disadvantage of a longer 60 or 72 month auto loan?

Lenders usually charge higher interest rates for long-term auto loans. Because there's more time for a borrower to default on the loan, lenders consider longer-term loans to be a higher risk. To compensate for that risk, they often charge a higher interest rate when you stretch out the loan term.

How much should I spend on a car if I make $300000?

Financial experts answer this question by using a simple rule of thumb: Car buyers should spend no more than 10% of their take-home pay on a car loan payment and no more than 20% for total car expenses, which also includes things like gas, insurance, repairs and maintenance.

Is 60 month financing a good idea?

Higher interest rates are another reason to stick with a 60-month loan. The longer the term, the more interest you will pay on the loan, both in terms of the rate itself and the finance charges over time.

How much should I spend on a car if I make $60000?

How much should I spend on a car if I make $60,000? If your gross salary is $60,000, your take-home monthly pay is probably around $3,750, assuming about 25% of your pay goes toward taxes and other expenses. Based on the 10-15% calculation, you should spend no more than $562.50 on a monthly car payment.

What are the disadvantages of a large down payment on a car?

What are the disadvantages of a large down payment? Providing more money down doesn't guarantee a lower interest rate, and it can cut into your savings.

How do I pay off a 6 year car loan in 3 years?

There are several ways to pay off a car loan early, and the best way to do it depends on your situation. Some of the most common ways include making larger payments each month, making a large bulk payment when you can and refinancing your loan to a shorter term or lower interest rate.

Is a 7 year car payment bad?

But having as long as seven years to pay off your car isn't necessarily a good idea. You can find a number of lenders that offer auto loans over an 84-month period — and some for even longer. But before you take out an 84-month auto loan, you should understand the potential risks and alternatives.

Is a $700 car payment high?

The average monthly payment for new cars, trucks and SUVs hit a record $730 in the first quarter, compared with $656 a month for the same time last year, according to Edmunds. Put another way, new buyers ended up paying an extra $74 a month on average — up 11.3% — than just a year ago.

Is $600 car payment too much?

How much should you spend on a car? Whether you're taking out an auto loan or a personal loan to pay for your car, it's a good idea to limit your car payments to between 10% and 15% of your take-home pay. If you take home $4,000 per month, you'd want your car payment to be no more than $400 to $600.

How much should I spend on a car if I make $100000?

Starting with the 1/10th guideline, created and pushed by Financial Samurai, this guideline states: buy a car in cash that costs less than 1/10th your gross annual pay. If you make $50,000 you should buy a car in cash worth $5000. If you make $100,000, the car you buy should be worth no more than $10,000.

Is a $500 car payment too much?

Financial experts recommend spending no more than 10% of your monthly take-home pay on your car payment and no more than 15% to 20% on total car costs such as gas, insurance and maintenance as well as the payment.

What car can I afford with 80k salary?

2019 Honda Civic. The Honda Civic was named best small car by MotorWeek, and with three styles — hatchback, sedan and coupe — it can fit anyone's aesthetic. The Civic is affordable to own with fair credit whether you make $80,000, $70,000 or $60,000.

How much is a $100,000 car payment per month?

Is 7 years too long for a car loan?

Stretching your loan term to seven or even 10 years is probably too long for an auto loan because of the interest charges that stack up with a higher interest rate. To illustrate, say you take on a $10,000 car loan for seven years with a 13% interest rate (a common rate for bad credit borrowers).

Why should you not finance a car for more than 4 years?

Higher borrowing costs: The lender has more time to collect from you, so you'll pay more in interest. Risk of being upside-down on your loan: You could find yourself owing more than your vehicle is worth, which is particularly problematic if you plan to sell or trade your vehicle in the near future.

What does 2.9 APR for 60 months mean?

How Much Does 2.9% APR Cost? On a $40,000 SUV, a 60-month (5-year) loan at 2.9% would cost approximately $3,018 in interest. On a 72-month (6-year) loan, it would increase to $3,629. We've even seen 84-month financing incentives that could translate to $4,245 in interest.

What is Dave Ramsey's rule for buying a car?

According to a Ramsey Solutions article, if you wonder what type of car you can afford, the answer is simple: “The car you can afford is the car you can pay for in cash.” “And as a general rule, the total value of all your vehicles combined shouldn't be more than half your annual income,” according to the article.

How much do I need to make to afford a 40k car?

For net monthly income, you're gonna need to make four thousand. six hundred and sixty seven dollars per month. So before taxes and other deductions, at a minimum. you'll need to make 70 thousand dollars per year. to afford a 40 thousand dollar car.

What is the 20 4 10 rule?

It suggests that you should do the following: Make a down payment of at least 20% of the car's purchase price. Finance the car for no longer than four years. Ensure that your total car expenses, including loan payments, insurance and fuel, do not exceed 10% of your gross annual income.