8-Year Car Loans Are No Longer Unheard Of (and Why You Don’t Want to Get One)

Photo (cc) by Nacmias Auto Sales, Service, and Repairs

Remember when car loans lasted for 36 or 48 months? These days, most Americans are driving their new car off the lot saddled with loans of five to seven years, and some are stretching it to as long as eight years.

According to The New York Times, Experian Automotive said the average length of a new-car loan hit a record high of 66 months in the second quarter of this year. Unfortunately, this is one of those times when setting a new record isn’t a good thing. The Times wrote:

Longer-term loans, particularly 72-month loans, “have become the new norm,” said [Melinda] Zabritski, [senior director of automotive finance for Experian]. “I don’t think they are going to go away anytime soon.” She said longer terms were available across all makes and models, and for borrowers with all sorts of credit scores.

This will come as no surprise to anyone who has looked at the price of a new car these days — vehicles have become more expensive. As a result, car buyers are taking out long-term loans to keep their monthly payments down.

Steven Szakaly, chief economist with the National Automobile Dealers Association, told the Times that long-term loans are “reasonable and normal” because cars are built better these days.

However, there are reasons why Money Talks News founder Stacy Johnson has never purchased a new car. And the disadvantages of these longer-term car loans, higher interest costs, negative equity and lower resale value, will take an even bigger toll on your wallet.

If you want to see how much money you could save in interest by choosing a shorter-term car loan, click here to access Bankrate.com’s auto loan calculator. The potential savings can be significant.

For example, if you borrow $25,000 at 3 percent interest over four years, your monthly payment would run about $553 and your total interest would be $1,561. If you change your loan term to 72 months, your monthly payment would be reduced to $380, but your total interest cost would jump to $2,348. That’s a $787 difference.

If you need to extend an auto loan to six or seven years to be able to afford a car, that’s a sign that you should choose a more affordable model.

Credit unions have the best deals

While you should check online search tools and websites for the best auto loan rates, you’ll likely find the best rate from a credit union. We have a new credit union loan comparison service here. Put in your ZIP code, and you’ll find the best rates from credit unions in your area and nationwide.

When you’re applying for car loans, keep in mind that credit inquiries made by lenders will not affect your FICO credit score for 30 days, according to myFICO. After that, multiple credit inquiries done within a typical loan shopping period, either two weeks or 45 days, depending on which version of the FICO score is being used, will count as only one inquiry, so the effect on your credit score will be minimal.

What do you think about long-term car loans? Share your comments below or on our Facebook page. The following video has more tips on getting the best deal on car loans: check it out.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Items Every First-Aid Kit Should Have
10 Items Every First-Aid Kit Should Have

Take control of your health and safety by customizing your own first-aid kit with these Amazon purchases.

12 Products to Keep Your Car Clean and Organized
12 Products to Keep Your Car Clean and Organized

These items will help put your vehicular mess to rest — and each is available for less than $20 on Amazon.

How to Save Up to 70% on 7 Everyday Purchases
How to Save Up to 70% on 7 Everyday Purchases

Stop getting sucked into paying a premium when good alternatives are available at huge savings.

21 Thrift Store Gems You Can Cash In On
21 Thrift Store Gems You Can Cash In On

Here’s what to look for at that overstuffed thrift store — and how you can make money from it.

60% of People With This Disease Don’t Know They Have It
60% of People With This Disease Don’t Know They Have It

Millions of people overlook this potentially potent condition that tends to strike women and older adults.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

The Next 5 Groups Who Will Get the COVID-19 Vaccine
The Next 5 Groups Who Will Get the COVID-19 Vaccine

The CDC has unveiled a schedule that likely will determine who gets the next doses.

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.