How Much More Would You Pay With a Long Term Auto Loan?

When you want to afford a higher-cost car with a reasonable monthly payment, consider how much a longer term would impact the total cost.

Laura Leavitt | 

May 5, 2022 | 3 min read

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The average length of car loans has slowly grown over the years. At this time a long term auto loan, such as 72-, 84-, and 96-months, are more common than ever. In fact, this average loan term has hovered around 67 months recently, showing how common these loans are becoming. If you're considering a car that would have a very large payment with a 36- or 48-month loan, looking at a long-term auto loan may make sense for car affordability. You should compare the total price of these loans so that you know what you're paying.

Examples of Long Term Auto Loans

Let's say that your car loan for a new car ends up being $45,000 after your down payment and any other upfront costs. This loan amount is called the principal—the amount you borrowed. The amount of the principal that remains is sometimes called the balance on your loan.

Let's look at how to calculate finance charges on a car loan payment of $45,000 and how those payments change with longer-term loans using an online loan calculator.

Choice A: If you choose a 6-year loan with a 6% interest rate, your monthly payment will be $745.78 per month, with a total finance charge of $8,696.16 over the life of the loan

Choice B: If you choose a 7-year loan with a 6% interest rate, your monthly payment will be $657.38 per month, with a total finance charge of $10,220.34 over the life of the loan

Choice C: If you choose an 8-year loan with a 6% interest rate, your monthly payment will be $591.36 per month, with a total finance charge of $11,770.98 over the life of the loan

These examples serve to demonstrate that affording a higher-end car or a new car may be possible with a longer-term loan due to the way it spreads out the payment over more months. In the end, you pay more money for the car total due to a higher annual percentage rate (APR); each of the above loans for the same car ends up costing:

Choice A: $53,696.16

Choice B: $55,220.34

Choice C: $56,770.98

If the car is worth that total investment to you, and the monthly payment is doable with your income and other expenses, you've found your strongest option for the priorities you've set.

Balancing Affordability and Timing

It's important to factor in that many people do not end up keeping a car for the full seven or eight years, so when you choose a long-term loan, you risk the possibility of having to sell the car later on or that the car no longer works before the loan is completed.

That being said, the data show that U.S. households, in general, are holding on to cars longer, which bodes well for owners with longer-term loans. If the risk of holding a loan for this many years is acceptable to you, lenders are often willing to extend these long-term loans and make a wider range of cars available to you with reasonable monthly payments.

Laura Leavitt

I love a good spreadsheet and will happily calculate compound interest all day, but my biggest focus is helping people achieve their financial goals. That could be saving up for a dream car or calculating the right car payment for your budget so you can get a reliable daily driver. I research and write about personal finance so that making great financial choices becomes easier for us all.