What is a good car loan length? (2024)

What is a good car loan length?

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 a 5 year car loan too long?

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 it good to finance a car for 72 months?

A 72-month auto loan isn't always the best option. Compared to a 60-month loan, you'll pay interest for another 12 months, which increases the overall cost of borrowing. A 72-month auto loan also puts you more at risk of being upside-down on the loan, which is owing more than your vehicle is worth.

Is 7 years a long time for a car loan?

An 84-month auto loan can mean lower monthly payments than you'd get with a shorter-term loan. 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.

Is it better to have a short or long car loan?

A shorter loan term is better, as it helps minimize borrowing costs and the risk of being upside-down on your loan.

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.

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.

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.

How much is a 30 000 car loan?

Calculator Results

A $30,000 auto loan balance with an average interest rate of 5.0% paid over a 6 year term will have a monthly payment of $483. In total, the loan will cost $34,787 with $4,787 in interest.

Who is offering the lowest auto loan rates?

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

What is an average car payment?

Car payment statistics

The average monthly car payment for new cars is $726. The average monthly car payment for used cars is $533. 39.20 percent of vehicles financed in the third quarter of 2023 were new vehicles. 60.80 percent of vehicles financed in the third quarter of 2023 were used vehicles.

What is a good down payment for a 35k car?

A down payment between 10 to 20 percent of the vehicle price is the general recommendation. But if you can afford a larger down payment, you can save even more money on interest payments over the life of the loan.

What is too big of a car loan?

According to our research, you shouldn't spend more than 10% to 15% of your net monthly income on car payments. Your total vehicle costs, including loan payments and insurance, should total no more than 20%. You can use a car loan calculator to calculate a monthly payment within your budget.

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.

What is the 20 3 8 rule for car loans?

The 20/3/8 car buying rule says you should put 20% down, pay off your car loan in three years (36 months), and spend no more than 8% of your pretax income on car payments. As we go into depth to determine how realistic this rule is, you may consider whether it can actually help you budget for your next car.

What is the 24 10 rule for cars?

Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses. These expenses include any money you put towards your new vehicle, including gas, insurance, and loan payments.

What is the 10% rule car loan?

When considering all the money you'll need to invest in a new car, try to keep your total transportation costs to 10% of your monthly income or less. This way, you can afford to keep up with payments and still cover any unexpected costs.

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.

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.

Is a $500 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.

Is it better to put money down on a car or pay extra principal?

YOU'LL GET A BETTER DEAL ON A CAR LOAN

If you make a down payment, you'll still finance or borrow the remainder of the cost. But the payment reduces your loan-to-value ratio—the amount of your loan divided by the cash value of the vehicle. A lower loan-to-value ratio often leads to better loan deals.

How much should you put down on a $25,000 car?

How much should you put down on a $25,000 car? For a $25,000 car, consider putting down at least $2,500 if it's used or at least $5,000 if it's new. By putting 10% or 20% down depending on the car's condition, you'll have the best options for loan terms and interest rates.

How much does $1,000 dollars take off a car payment?

Putting more down reduces the amount you'll need to finance and helps you to pay the loan off sooner. As a general rule, every $1,000 in the down payment reduces your monthly payment by $15 to $18.