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72 and 84-Month Auto Loans: Good Idea or Bad Investment?

72 and 84-Month Auto Loans: Good Idea or Bad Investment?
LeeMarie Kennedy
LeeMarie KennedyUpdated August 19, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
When you’re shopping for an auto loan, it can be tempting to take out a loan with a longer term. That’s because the monthly payment can be substantially smaller than it would be for a loan with a shorter term. Getting more money in your pocket each month may well seem like a smart financial move. But, should you really opt for a 72-month auto loan or an 84-month auto loan? Will it actually be beneficial in the long run? It all depends, but there are certainly cons to weigh against the pros of a long-term car loan. Let’s look at them both.

Potential Benefits of 72- and 84-Month Auto Loans

There can be some advantages to choosing a 72- or 84-month car loan, depending on your unique financial situation: 

Lower Monthly Payments

Car loans with longer repayment lengths can mean a lower monthly payment.  For example, a $30,000 loan with a fixed 4% interest rate would charge $553 per month if there was a 60-month term. But payments for the same loan amount with an 84-month auto loan would be $411 per month. That’s nearly $150 more in your pocket each month, which is one reason a longer term loan can be so tempting. 

Ability to Purchase a More Expensive Car

With the money you save each month thanks to the lower monthly payments, you might be able to afford a pricier or more luxurious vehicle. It’s important to note, however, that even with a 72- or 84-year loan, opting for a more expensive car can end up increasing your monthly payments. 

More Chances to Refinance

With longer car loan terms, there’s more time to consider auto loan refinancing down the line. For instance, if you’re not locked into a fixed rate and your interest rate continues to rise, you could refinance the entire payment plan and also adjust the number of years you have to pay the loan back. You can even consider refinancing your auto loan with bad credit, especially if you find a cosigner whose credit is in good standing. 

A More Flexible Monthly Budget

By opting for a smaller monthly payment, you could make more room in your budget for other financial goals. Some particularly worthwhile ones might include the following.  
  • Paying down high-interest debt 
  • Putting away funds for retirement 
  • Contributing to an emergency fund for unexpected expenses 

Risks and Downsides of 72- and 84-Month Car Loans

After reading that list of pros, you might find yourself wondering, “So, is an 84-month car loan or a 72-month car loan ever a bad idea?” Here are a few of the potential downsides and risks to securing 72- and 84-month car loans: 

Overall Higher Cost

While a lower monthly payment can be a benefit, it doesn’t necessarily mean lower overall costs. In fact, choosing an 84-month auto loan over a 60-month auto loan means you’re paying two extra years of interest. With a 5% interest rate, this equates to almost $2,000 more out of your pocket over the life of the loan. If the interest rate is higher than it would be for a shorter-term loan, which is often the case with long-term auto loans, you could be looking at even higher overall costs. 

Risk of Going Upside Down on the Loan

An upside down auto loan means that you owe more than the car is worth. When auto lenders shrink the monthly payment, it extends the amount of time you spend paying overall. The result? It takes longer for you to have equity in the vehicle. In the event that the car is stolen or totaled during the extended repayment period, you could be on the hook to pay extra for gap insurance, which covers the difference between how much you owe when you’re upside down and how much the car is actually worth. Bottom line: you’re paying for a car that simply isn’t worth it. 

A Lot Can Happen in 72 to 84 Months

While the average new-car loan length is around 69 months, 84 months is seven years’ worth of your life. A lot can change in seven years—the length of your commute, the number of people using the car, wear-and-tear, repairs, and required maintenance. All of this could occur while you’re still on the hook for a long-term car loan, possibly without a warranty. Not only that, you might start to notice newer vehicles sharing the roadways and feel the desire to purchase a fresher model or one with more advanced safety features. If you’re locked into a 72- or 84-month loan or owe more than your car is worth, you could be required to roll over what you still owe into a new loan just to purchase a new car. 

Summary of the Pros and Cons of 72- and 84-Month Auto Loans

Use this chart for a quick look at the benefits and disadvantages.
Recommended: Car Loan Terminology

4 Alternatives to Long-Term Car Loans

When you’re looking at auto financing, your choices don’t have to boil down to just a long-term car loan vs. a short-term car loan. There are several other alternative approaches you might consider: 

1. Purchase a Less Expensive Car

While a souped-up luxury vehicle can be enticing, setting your standards a bit lower could cut down on overall costs. Selecting a less-loaded model in the same line might save you a significant amount overall. 

2. Choose a Used Car

By picking a used automobile with low mileage, you can still get a reliable vehicle at a more reasonable cost. This can help you avoid taking out a 72- or 84-month car loan and the deal might even come with added perks or warranties. 

3. Make a Bigger Down Payment

The more money you can pay upfront when purchasing a car, the less you’ll need to borrow. With a smaller loan, the monthly payments will be less, so you might not have to opt for a 72-or 84-month auto loan.

4. Lease a Car Instead

When it comes to the choice between leasing or buying a car, it’s a particularly personal decision. Leasing a car can mean a lower down payment and monthly payments when compared to buying a car. That said, leasing also comes with certain fees, restrictions, and penalties for going over on mileage, so it’s not necessarily a best fit for everyone. And of course, when you lease, you don’t own the car.

Tips for Securing a Short-Term Auto Loan

With what’s called a short-term auto loan, the repayment period is substantially shorter, typically between three and 18 months with daily, weekly, or monthly payments. These types of loans also come with higher interest rates and are typically borrowed in smaller amounts.If you’re interested in securing a short-term auto loan, you could reach out to an online loan lender to start the process and see if it’s the right fit for your financial needs. 

When You Might Consider a 72- or 84-Month Auto Loan

If you’re looking for lower monthly payments, the option to purchase a more expensive car, or the ability to refinance your auto loan over a longer period of time, you might consider securing a 72-or 84-month auto loan. However, it’s still wise to be wary of the high car loan interest rates and overall costs associated with long-term loans, getting locked into a car that might no longer meet your needs, or going upside down on the loan altogether. 

The Takeaway

At the end of the day, your auto loan term preference is your personal choice and should fit your individual situation.While lower monthly payments may be appealing, taking on a 72- or 84-month car loan commitment could mean biting off more than you can financially chew. There are limited instances in which a long-term auto loan is actually worth it. Typically opting for a standard auto loan can offer more benefits to your financial future.With Lantern by SoFi, you can refinance your auto loan in a few easy steps, freeing up cash for other expenses and helping you crush your financial goals. Filling out one simple form can get you multiple offers from Lantern’s lending providers.
Photo credit: iStock/Sean_Kuma
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC0821143

About the Author

LeeMarie Kennedy

LeeMarie Kennedy

LeeMarie Kennedy is a Boston-based copywriter and content creator with over a decade of experience writing for a variety of publishers, institutions, and corporations. She has spent the last few years focusing on writing for financial services, technology, HR and TA, and health & wellness sectors. LeeMarie has a BA in Journalism from Quinnipiac University and a MS in Organizational Communication from Northeastern University and was an original contributor to The Daily, SoFi's newsletter.
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