Should you ever do a 72 month car loan? (2024)

Should you ever do a 72 month car loan?

Is a 72-month car loan worth it? 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 are the biggest disadvantages of financing a car for 5 years instead of 3 years?

Is it worth financing a car for 5 years?

Key takeaways. A longer loan term means you'll get a lower monthly payment, but you'll also pay more in interest. A shorter loan term is better, as it helps minimize borrowing costs and the risk of being upside-down on your loan.

Is it smart to finance a car for 7 years?

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.

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.

What length of car loan is best?

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.

Why is the total cost for a car more expensive if you have a 72 month loan versus a 36 month loan?

Total Interest Paid: The total amount of interest paid over the life of the loan. The longer you take to repay the loan, the more interest you generally pay overall. Add together the total principal paid and total interest paid to see the total overall cost of the car.

How to pay off a 5 year car loan in 3 years?

When should you not finance a car?

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 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.

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

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 is a $40,000 car loan payment 84 months?

For example, a car buyer considering a $40,000 new car loan with an 84-month term at 9% APR would have a monthly car payment of about $623 and pay $12,369 in interest over the seven-year loan.

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

Disadvantages of a Larger Down Payment

The two biggest cons of making a down payment that's around 50 percent are: More money down doesn't lower your interest rate – Bad credit car buyers get higher than average interest rates, and it's extremely rare that a larger down payment can lower it.

What is the oldest car you should finance?

Typically, a bank won't finance any vehicle older than 10 years, even if you have good credit. If you don't have great credit, you may find it difficult to finance through a bank, even for a new car.

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.

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.

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.

What is 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's a normal car loan term?

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 are the disadvantages of paying off a car loan early?

When you pay off your car loan early, your debt will become smaller. This is positive for your credit history but might lower your credit score slightly because you're no longer logging on-time monthly loan payments. Once you pay off the loan, you will no longer have positive payment history for that long-term 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.

What is 6% interest on a $30000 loan?

For this example, the interest calculation is straightforward: a 6% interest rate on $30,000 results in $1,800 in interest over one year. This means, without considering any repayments or additional fees, the cost of borrowing $30,000 for a year at this interest rate would increase the total amount owing to $31,800.

Is $600 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.