Is it smart to do a 72 month car loan?

Asked by: Prof. Adrain Dach DDS  |  Last update: September 15, 2022
Score: 4.3/5 (40 votes)

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.

What are the pros and cons of a 72 month auto loan?

Here are the financial pros and cons of taking on a 72-month car loan or an 84-month car note.
  • Pro: Getting lower monthly payments. ...
  • Pro: Achieving greater financial flexibility. ...
  • Con: Paying additional interest. ...
  • Con: Having negative equity or being “upside down” in the car loan. ...
  • Con: Buying more car than you can afford.

Is a 6 year car loan a good idea?

There's really only one benefit of a long-term auto loan that spans six to seven years or even longer. The longer the car loan, the smaller the monthly payment. By taking out financing with an extended loan term, you can potentially buy a more expensive car and still stay within your monthly budget.

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

Because of the longer payments, you may still owe money on your car. If this is the case, it is within the realm of possibility that you actually owe money, even after you trade in your vehicle. This will leave you in what is called negative equity, and you don't want to be there.

What is the best amount of months to finance a car?

According to most personal finance experts, the optimal length for a car loan is 48 months, although some are upping this length to 60 months due to the increased cost of vehicles and lower interest rates.

ARE 72-84 MONTH AUTO LOANS A BAD IDEA??

26 related questions found

Do you save money by paying off a car loan early?

If your car loan is a simple-interest loan, you pay interest based on what you owe at a given time. The sooner you pay off the loan, the less you'll spend on interest — potentially saving you hundreds of dollars.

Is it better to pay off a car loan early?

Paying off your car early eliminates your auto loan from the equation. Your DTI will naturally be lower, which opens you up for other forms of credit. It also helps improve your chances of refinancing other loans or consolidating credit card debt at a lower rate.

How long does it take to pay off a $30000 car?

With a loan amount of $30,000, an interest rate of 8%, and a loan repayment period of 60-months, your monthly payment is around $700. Before you purchase your new vehicle, remember to budget for car maintenance, gas, and car insurance.

What APR is too high for a car?

A high APR (“annual percentage rate”) car loan is one that charges higher-than-average interest rates. The legal limit for car loans is around 16% APR, but you will find lenders that get away with charging rates of 25% or more.

Does your credit score go up when you pay off a car?

Once you pay off a car loan, you may actually see a small drop in your credit score. However, it's normally temporary if your credit history is in decent shape – it bounces back eventually. The reason your credit score takes a temporary hit in points is that you ended an active credit account.

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

As long as your loan doesn't have precomputed interest, paying extra can help reduce the total amount of interest you'll pay. You'll pay off your loan faster.

Why does your credit score drop when you pay off a car loan?

If you pay off your only active installment loan, it is considered a closed credit account. Having no active installment loans or having only active installment loans with relatively little amounts paid off on those loans can result in a score drop.

How fast will a car loan raise my credit score?

A lot of new credit can hurt your credit score. While many factors come into play when calculating your FICO credit score, you may start to see your auto loan raise your credit score in as few as 60 to 120 days. But remember, everyone's credit situation is different, so your results may vary.

What should you not say to a car salesman?

10 Things You Should Never Say to a Car Salesman
  • “I really love this car” ...
  • “I don't know that much about cars” ...
  • “My trade-in is outside” ...
  • “I don't want to get taken to the cleaners” ...
  • “My credit isn't that good” ...
  • “I'm paying cash” ...
  • “I need to buy a car today” ...
  • “I need a monthly payment under $350”

What happens after you pay off your car?

Once you've paid off your loan, your lien should be satisfied and the lien holder should send you the title or a release document in a reasonable amount of time. Once you receive either of these documents, follow your state's protocol for transferring the title to your name.

How do you avoid interest on a car loan?

PAY HALF YOUR MONTHLY PAYMENT EVERY TWO WEEKS

That adds up to 13 full payments a year, rather than 12. If you have a 60-month, $10,000 loan, you'll save only about $35 in interest, but you'll repay the loan in 54 months rather than 60.

What is the downside of a longer car loan?

Now for the disadvantages that come with long-term auto loans: Stay in debt longer: A long loan term means that you'll be stuck in debt for a long time. Lower resale value: Depreciation will eat away at your vehicle for years. With that, you'll walk away with a lower resale value when the loan is finally paid off.

What are 5 tips for purchasing a vehicle?

5 Tips for Buying a New Car
  • Find Out the Cost of Insurance. Your insurance rates typically change when you acquire a new vehicle. ...
  • Look for Safety Technology. ...
  • Consider Vehicle Design and Size. ...
  • Get Pre-Approved for a Car Loan. ...
  • Negotiate the Best Price.

Is a 2 year car loan a good idea?

Auto loans over 60 months are not the best way to finance a car because, for one thing, they carry higher car loan interest rates. Yet 39% of new-car buyers in the first quarter of 2021 took out loans of 61 to 72 months, according to Experian.