Loan Length Matters a Lot How Many Months is Right for You

Why the Length of Your Car Loan is so Important

Amanda Hart

Big detail

Financing a purchase as big as a new vehicle is a big decision to make. You're making a large financial commitment that will affect our income, credit and transportation situation for years to come.

Taking your time to get the best car financing available is a must. The rates and terms you lock yourself into now will make a huge difference down the road. You need to look at all the factors at play and manipulate them to get the best deal possible.

One huge factor that goes into determining your car loans is the length of the loan. The average car loan length these days is right around 60 months, or five years, but they commonly go as low as 36 months and as long as 72 months.

Long or short?

Choosing short term or long term loans each has their own advantages, so you need to find out the pros and cons to each and do the math to see which works best for you.

When you stretch loans out longer, you obviously have more months to pay off the same price, so your monthly payments will be lower. This makes new car deals more affordable, but it comes at a cost.

The longer the term, the higher the interest rate for auto finance will be. Longer terms are more risky for lenders, and to compensate they will only give long terms coupled with higher interest rates to people with better credit scores.

Choosing a short term loan will cost you much less in interest overall, but you will be paying much more every month. However, it does get your car paid off faster than long term loans.

It's best to be brutally honest at this stage. You need to evaluate what you are willing to commit to, and which loan length works better for your financial and life situation.

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