60 vs 72 vs 84-Month Car Loans: The Real Cost

A longer car loan lowers the monthly payment, and that is usually how it is sold. The cost is more total interest and a longer stretch where you may owe more than the car is worth.

A worked example

Take a hypothetical $35,000 car with $5,000 down, financing $30,000 at 7% APR:

Term	Monthly payment	Total interest
36 months	$926.31	$3,347
48 months	$718.39	$4,483
60 months	$594.04	$5,642
72 months	$511.47	$6,826
84 months	$452.78	$8,034

Going from 60 to 84 months cuts the payment by about $141 a month, but adds $2,392 in interest and two extra years of payments. Lenders often charge a higher rate on longer terms, which would widen the gap further.

Compare terms with the auto loan calculator.

The underwater risk

Cars lose value fastest in the first years, while early loan payments go mostly to interest. With a small down payment and a long term, the loan balance can exceed the car's value. If the car is totaled or you need to sell, you would owe the difference.

A larger down payment, a shorter term, or a less expensive car all shorten that window. Gap insurance covers the shortfall if a car is totaled while you are underwater.

Before you sign

• Get a quote from a bank or credit union first, so you can compare it with dealer financing.
• Enter the out-the-door price, including tax, fees and any add-ons that will be financed.
• If a long term is the only way the payment fits, consider a less expensive car.

Source: CFPB: Auto loans.