Is 72 months too long for a car loan? (2024)

Is 72 months too long for a car loan?

Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go.

Is it smart to do a 72-month car loan?

It's smarter to do a 60-month or 48-month loan rather than a 72-month loan if you can. With a 72-month term, you'll pay more in interest and may risk owing more than your car is worth if you didn't provide a good down payment on the vehicle.

What is the best term length for car finance?

You can finance your car for as little as a few months to more than 84 months—or seven years. 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.

What are the biggest disadvantages of financing a car for 5 years instead of 3 years?

Not all cars lose value at the same rate, but, on average, new cars lose 40 percent of their value after five years. If you decide to trade in your vehicle or sell it, you may find yourself upside down on your loan, owing more than what it's worth.

What is the rule of 72 on a car loan?

Just divide 72 by your interest rate, and there you have how long it would take for the loan or investment amount to double. So, 1% would take 72 years to double. 5% takes about 15 years to double. 10% takes 7.2 years to double.

Why is a major downside of a 72-month loan?

Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan.

How to pay off a 7 year car loan in 3 years?

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.

What is the most common car loan length?

What is the Average Car Loan Length? The most common loan length is currently 72 months for both new and used vehicles. The average length of a car loan changes from time to time, and 72 months is a bit higher than in previous decades.

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 is considered a high car payment?

According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

Is 500 a month a high car payment?

The average monthly car payment is now a record $733, according to Edmunds. And even if your monthly auto loan payments are around $500 per month, that still may be uncomfortably high. And that's before adding up the cost of maintenance, fuel, and auto insurance.

Do rich people finance expensive cars?

Overall, only 8.5% of these high rollers paid cash. Around 31% leased and 60.4% took out a loan with an average payment of $2,201 and an average term of 56 months. For comparison, the general market in 2021 saw 9% of buyers paying cash, 20% leasing, and 70% taking out a loan.

How much is a $30,000 car payment for 5 years?

Provided the down payment is $5,000, the interest rate is 10%, and the loan length is five years, the monthly payment will be $531.18/month. With a $1,000 down payment and an interest rate of 20% with a five year loan, your monthly payment will be $768.32/month.

How much is a $40000 car payment for 72 months?

If you take a car loan of $40000 at an interest rate of 4.12% for a loan term of 72 months, then using an auto loan calculator, you can find that your monthly payment should be $628.

How much is a 20k car payment for 72 months?

If you choose a loan term of 72 months, your monthly payment drops to $316, and a 60-month loan term will be $377. A car loan with a low-interest rate could leave you with monthly payments that are higher than you can afford.

Is 6 years too long to pay off a car?

How long is too long for a car loan? Many experts believe that once an auto loan passes five years (60 months), the benefits of the longer term are outweighed by potential problems, so that means any loan that lasts for more than five years would be a long-term auto loan.

Is a 30% down payment on a car good?

A larger down payment can show lenders you are serious, which in turn can help you get the best auto loan rate. Experts tend to recommend putting down 20 percent or more on the vehicle.

Is 5.9 APR good for a car 72 months?

A 72-month loan for a car is a long-term loan, and long-term loans typically come with higher interest. While long-term loans translate to lower monthly payments, they result in more interest paid over the life of the loan. With that said, an interest rate of around 5% for a 72-month auto loan is considered ideal.

What happens if I pay an extra $100 a month on my car loan?

Your car payment won't go down if you pay extra, but you'll pay the loan off faster. Paying extra can also save you money on interest depending on how soon you pay the loan off and how high your interest rate is.

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

What happens if I pay my car payment twice a month?

Although it may not seem like much, paying twice a month rather than just once will get you to the finish line faster. It will also help save on interest. This is because interest will have less time to accrue before you make a payment — and because you will consistently lower your total loan balance.

Why do car dealers want a big down payment?

A down payment helps many lenders remove some of the upfront risk associated with a car loan. So if you decide to buy a car with no money down, realize you may have to pay a higher interest rate throughout your loan. It can also mean you may pay more for your loan over time due to those higher rates.

What is a good down payment on a 30k car?

Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

Should I pay 50% down on a car?

Not only does this show lenders how dedicated and serious you are to pay back the loan, investing some of your own cash into this purchase motivates success. You'll really see changes for the financial better in your car loan when you make a really large down payment, about 50%.