Is a 60 Month Car Loan Good for You

A 60-month car loan might seem like a good option, but is it really? According to the article, a 60-month car loan can have a lower monthly payment compared to a shorter loan term, but this can also mean you'll be paying more in interest over the life of the loan.

This can be a problem if you're not careful, as it can increase the total cost of the car. For example, a $20,000 car with a 60-month loan at 6% interest would have a total interest paid of $3,444, making the total cost of the car $23,444.

You might think that a longer loan term is better, but it's not always the case. In fact, a 60-month loan can also mean you'll be driving an older car for longer, which can lead to higher maintenance costs and a decrease in the car's value.

If you're considering a 60-month car loan, it's essential to weigh the pros and cons carefully and consider your financial situation.

Choosing a car loan term can be overwhelming, but it's essential to consider a few key factors. The total amount of interest you'll pay is a significant consideration, as it can add up quickly.

A longer loan term means lower monthly payments, but it also means you'll pay more in interest over the life of the loan. For example, a $35,000 loan with 9% APR and no down payment can result in significantly different total interest paid depending on the loan term.

You should also consider your financial situation and whether you can afford the higher monthly payments of a shorter-term loan. According to a 2024 Experian study, a shorter-term loan can save you more than $4,500 over the longest term.

Here's a breakdown of the numbers for an average borrower financing $40,634 for a new car with an annual percentage rate (APR) of 6.73%:

Ultimately, the best auto loan term for you will depend on your individual financial situation and needs.

Long-term loans may seem like a good deal upfront, but they can end up costing you more in the long run. The longer you stretch out an auto loan, the lower the monthly payment will be, but you'll pay more total interest.

You'll pay less overall for your vehicle if you choose a shorter car loan. Typically, the shorter the car loan, the better the interest rate the lender will offer, which reduces the interest rate and overall cost of the loan.

Here's a comparison of the total interest paid on different loan terms:

Going from 48 months to 84 months increases the total interest paid by nearly $5,500. This is because you have more time for interest to accrue, which can add up quickly.

If you can afford the higher payments of a shorter-term car loan, it's worth considering. You'll save on interest costs and may even get a break from car payments before taking out another auto loan.

If you're considering a 60-month car loan, you might be wondering if it's the best option. NerdWallet recommends keeping auto loans to no more than 60 months for new cars, but that can be a challenge in today's market with high car prices.

It's essential to weigh the pros and cons of long-term loans. While they might help you afford a car, they can cost you more in the long run. You can avoid some of the negative outcomes of long-term loans by sticking to the recommended maximums.

If you can afford a shorter term, it's worth considering. According to a 2024 Experian study, the longer the car loan term, the more interest you'll pay. Here's a breakdown of the numbers for an average borrower financing $40,634 for a new car with an annual percentage rate (APR) of 6.73%:

As you can see, a shorter term can save you a significant amount of money in interest payments.

A long-term loan can seem like a good deal at first, but it can end up costing you more in the long run. Going from a 48-month to an 84-month loan can increase the total interest paid by nearly $5,500, as seen in Example 6.

With a long-term loan, you're paying down the principal more slowly, which means you're accruing interest over a longer period of time. This can add up quickly, with an 84-month loan costing $3,700 more in interest than a 60-month loan for a $35,000 car loan with a 9% APR, as shown in Example 3.

Here's a comparison of total interest paid for different loan terms:

Keep in mind that a long-term loan can also put you at risk of being upside-down on your loan, where the car's value is less than what you still owe on it, as seen in Example 8.

A long-term car loan can be a good option if you need to finance a reliable vehicle but have a limited income. Spreading the payments over a longer term reduces the monthly financial burden, making it easier to budget. This option can be especially useful if the car you want is essential for daily use or you need a more manageable monthly payment to handle other costs.

Most auto loans use simple interest, which means your payment amount will be the same each month, with a portion going toward paying down your principal balance and the rest to paying interest. Unless you pay more than the required monthly payment and ask the lender to apply it to principal, the portion of your payment that goes to principal doesn’t change.

A long-term loan with lower payments means you’re paying down the loan’s principal more slowly and accruing interest over a longer period of time. Extending a car loan even a year or two can significantly increase the overall amount of interest you pay. For example, going from a 60-month loan to an 84-month loan would mean paying $3,700 more in interest on a $35,000 car loan with a 9% APR.

The longer your loan term, the more interest you will pay. In fact, going from 48 months to 84 months increases the total interest paid by nearly $5,500 on a $35,000 car loan with a 9% APR.

Here's a comparison of the total interest paid on different loan terms:

As you can see, the longer the loan term, the more interest you'll pay. This is why it's essential to carefully consider your financial situation and choose a loan term that works for you.

An 84-month auto loan can be practical, but it may not be the best choice if you can afford a shorter term. In fact, a shorter-term loan can save you more than $4,500 over the longest term.

If you have good to excellent credit, your APR will usually fall on the lower end. This makes long-term loans like an 84-month loan more appealing.

A high APR drives up the total cost of your car loan, so it's essential to qualify for a low APR.

NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars. This can be a challenge in today's market with high car prices.

Before heading to the dealership, it's essential to find a good loan based on current rates. Research auto loan rates - a dealership isn't the only place you can get a used car loan. Dealerships usually work with a financing company to help a customer make a transaction on the spot, but other locations like banks, credit unions, and other financing institutions may offer better rates on car loans.

By getting loan offers before visiting the dealership, you can compare rates and terms to find the best deal for your situation. This can save you money in the long run and help you avoid falling into a loan with unfavorable terms.

NerdWallet recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars.

Long-term auto loans can cost you more in the long run, but may help you afford a car. Short-term loans will cost less overall, but might not be a wise choice if you can't afford the monthly payments.

Ultimately, the auto loan term you agree to can make a big difference in what you pay monthly and in total, so it's essential to compare terms and choose the one that makes the most sense for you.

Auto insurance costs can add up quickly, especially when you factor in longer loan terms. For example, a 72-month loan term can result in a total interest cost of $10,424, which is a significant amount to consider when calculating your overall expenses.

If you're planning to finance a $35,000 car loan with a 9% APR, you'll want to carefully consider your insurance costs. A longer loan term can mean more time for your insurance premiums to add up.

Here's a breakdown of the monthly car payments and total interest costs for different loan terms:

Remember, insurance costs can vary depending on several factors, including your location, driving history, and the type of vehicle you own. Be sure to factor these costs into your overall budget when deciding on a loan term.

You can stretch out an auto loan to lower your monthly payment, but this can also mean paying more in interest over time.

Long-term auto loans can help you afford a more reliable car at a higher price, and may even help you establish or rebuild credit if you make payments on time.

However, choosing a long-term loan can cost you more in the long run.

If you can afford the higher payments of a shorter-term car loan, you'll save on interest costs and may even get a break from car payments before taking out another loan.

NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars.

Ultimately, the best auto loan term for you will depend on balancing cost, affordability, and your specific needs.

Don't be afraid to ask to see other loan terms or use an auto loan calculator to compare options before making a decision.