App version: 0.1.0

Guide to Long-term Car Loans: 72 and 84-Month Auto Loans

72 and 84-Month Auto Loans: Good Idea or Bad Investment?
LeeMarie Kennedy
LeeMarie KennedyUpdated October 14, 2022
Share this article:
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.

What Is Considered a Long-term Car Loan?

An auto loan with a repayment term of 72 months or longer can be considered a long-term car loan. That’s because the average auto loan is about 70 months, data show.Experian’s State of the Automotive Finance Market report for the second quarter of 2022 shows the average new car loan is 69.46 months, while the average used car loan is 68.01 months.A 72-month car loan and an 84-month auto loan both exceed the U.S. national average. Anything above the national average can be considered a long-term car loan, including long-term car loans of 85 months or higher. Some lenders may offer 144-month auto loans.Is a 72-month car loan bad? That depends on your personal circumstances. A 72-month car loan could be right for you if a six-year loan term works best for you.

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-month 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

0% Interest

A 72-month car loan or an 84-month auto loan in some cases may include a 0% interest rate. Consumers with good credit may qualify for auto loans with an annual percentage rate or APR of 0%. In general, good auto loan interest rates fall under 5%. The average interest rate on new car loans in the second quarter of 2022 stood at 4.33%, according to Experian data.The way how interest on car loans work can depend on the following factors:
  • Does the loan use simple interest or precomputed interest?
  • Is the loan interest-free with 0% APR?
  • Does the loan have a fixed interest rate or a variable rate?
Simple interest auto loans and precomputed interest auto loans are among the different types of car loans available to consumers. A simple interest car loan charges simple interest on the outstanding balance of your loan each month, whereas precomputed interest auto loans charge interest based upon upfront calculations.A 0% APR car loan does not charge interest whatsoever. Captive finance companies affiliated with auto manufacturers may offer interest-free car loans as a sales tactic. The lender, for example, may offer 0% APR on new cars of a certain make and model.Fixed-rate car loans have an interest rate that will never change over the life of the loan. Variable-rate car loans, meanwhile, have an interest rate that can fluctuate over the life of the loan depending on market conditions.Consumers may ask, “What happens to a car loan in case of death?” The answer is that car loans do not simply disappear when a borrower dies. A surviving spouse may be responsible for paying the debt, or a lender may move to repossess the vehicle.

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.

Higher Interest Rates

Unless you qualify for 0% APR, long-term new car loans and long-term used car loans may include higher interest rates than loans with shorter terms. A higher interest rate can translate into higher borrowing costs over the life of your loan.The way how car loans work is that lenders provide financing to help borrowers purchase a new or used vehicle. Borrowers are expected to repay the car loan over a set term, and these loans may include interest charges. The interest rate that you can get on a long-term car loan may be higher than the interest rate you may get on a short-term car loan.

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 70 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.

Lack of Flexibility

Long-term car loans may limit your financial flexibility. Lenders may be unwilling to offer their best rates of interest on an 84-month car loan. An 84-month auto loan can keep you in debt for up to seven years and may become a heavy burden if your economic circumstances change for the worse over the life of your loan.Lenders may impose late fees if you fail to make a timely payment on your loan. But lenders may also honor a car payment grace period before such penalties would apply.

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

The below table highlights some of the pros and cons of these long-term auto loans:
72- and 84-Month Auto Loan Pros72- and 84-Month Auto Loan Cons
Lower monthly paymentsMore interest paid over the life of the loan and probably at a higher interest rate
Options to refinanceGetting locked in for a long period of time
Recommended: Car Loan Terminology

6 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 high-maintenance 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. Getting a short-term car lease 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.

5. Make Higher Monthly Payments

A 72-month car loan doesn’t necessarily have to take six years to pay off. You may make higher monthly payments to pay the debt off early. This might be worth considering if your loan doesn’t include prepayment penalties. Making higher monthly payments can minimize your interest charges over the life of your loan.Prepaying a precomputed interest auto loan, however, may not be as beneficial as prepaying a simple interest auto loan. That’s because any refund you may get from prepaying a precomputed interest car loan is generally lower than what you might have saved if the loan had a simple-interest cost structure.

6. Get a Cosigner

Getting a cosigner who meets the lending requirements may help you qualify for car loans at lower rates of interest. A car loan cosigner is an individual who shares the financial responsibility of repaying the loan alongside the primary borrower, which reduces risk to the lender.Some lenders may offer unsecured car loans. The difference between secured vs. unsecured auto loans is that the vehicle serves as collateral on the secured loan, while borrowers pledge no assets as collateral on an unsecured car loan.Borrowers and cosigners are expected to provide proof of identity and proof of income when applying for auto loan financing, among other requirements for a car loan.If you’re drowning in car loan debt, you may wonder, “Can someone take over my car loan?” Transferring an auto loan can be a complex process, but it may be an option for you.With what’s called a short-term auto loan, the repayment period is substantially shorter, typically ranging from 12 to 36 months. 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.

Short-term vs Long-term Auto Loans

The below table compares short-term auto loans with long-term auto loans:
Short-term auto loansLong-term auto loans
Term length generally runs for 36 months or lowerTerm length generally runs for 72 months or higher
May feature interest rates as low as 0%May feature interest rates as low as 0%

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.Borrowing money to buy a car doesn’t necessarily require traditional auto loan financing. Borrowers can take out short-term or long-term personal loans, for example, and use the proceeds to buy a new or used car.

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, and refinancing can always be an option to consider.Lantern by SoFi can help you compare auto refinance rates in a few easy steps. Just fill out one simple form and explore your options.Find and compare auto loan refinance options with Lantern.

Frequently Asked Questions

Do banks offer 84-month auto loans?
What is the downside of financing a car for 84 months?
What does 0% financing for 84 months mean?
What is the longest-term car loan available?
Photo credit: iStock/Sean_Kuma

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.
Share this article: