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Should You Get A 72-Month Car Loan?

Miranda Crace3-Minute Read
UPDATED: July 25, 2023


If you need to buy a new car but don't have the money to pay cash, taking out a car loan can act as a lifesaver. And as vehicle prices continue to go up, extending the length of your auto loan is an easy way to achieve a lower monthly payment.

According to data from Edmunds, the average loan term for a new car is 70.6 months. Choosing a 72-month or 84-month loan may sound appealing, but is it the best choice financially?

The answer to that question depends on your credit history as well as your own financial goals. This article will show you what taking out a 72-month car loan can mean for your finances, and address some alternative options for purchasing your new vehicle.

What It Means To Finance A Car For 72 Months

An auto loan is a type of installment loan, which means you make monthly payments over a fixed period of time. Most auto loans come with repayment terms that are anywhere from as little as 24 months to as long as 96 months.

The standard auto loan is 60 months, which is 5 years. If you choose financing that's longer than that, it follows that you'll have a long-term auto loan.

The benefit of taking out a 72-month loan is that it allows you to buy a nicer car while lowering your monthly payments. Auto dealers offer these long-term loans to reduce the monthly payments without lowering the sale price of the car.

For borrowers with bad credit, taking out a long-term loan may be worth it. Many consumers, though, don't realize that extending the monthly payments could also bump up the amount of interest you end up paying.

Is A 72-Month Car Loan A Bad Idea?

In some situations, taking out a 72-month auto loan may make sense. But in general, most financial experts agree that it isn't a good idea. Here are the three biggest drawbacks of a 72-month loan:

1. You'll End Up Paying More Than The Car Is Worth

When you take out a long-term auto loan, you'll end up paying more money for the vehicle than it's worth. This is what's known as being "underwater" or "upside down" on the loan.

New cars depreciate very quickly and lose a lot of their value within the first couple of years. Many experts say a car loses 10% of its value the moment you drive it off the lot. Different cars depreciate at different rates, so yours could lose its value even faster.

Consider some of the costs of owning a car, too. If you unexpectedly get into an accident or if your car is stolen, you may owe more money on the car than it's worth. Or, if you decide you want to sell the car, this will lower the resale value.

If you do decide to take out a 72-month loan, it's a good idea to purchase gap insurance. This insurance will cover the difference between what the car is worth and what you still owe on it.

2. 72-Month Car Loan Rates Are Typically High

Lenders know that borrowers who take out a longer loan are more likely to default on the loan. To compensate for the added risk, they often charge higher annual percentage rate (APR) or interest rates. There's no benefit to paying more money in interest, and it’s considered by some to be wasted money.

3. You Could End Up Paying A Lot Of Money In Auto Repairs

If you choose to take out a long-term auto loan, your payments will most likely end up exceeding the car's warranty. This could cause financial problems down the road.

For instance, let's say the warranty lasts 5 years, but you owe payments on the car for 6 years. You may not be able to afford to make a major car repair and continue to make the monthly car payments after the warranty is up. There are plenty of auto repair financing options if you need a little extra help, but by doing so you may owe maintenance costs in addition to your car payment with a longer loan.

Alternatives To A 72-Month Auto Loan

If you're considering buying a car but the monthly payments are too high for 60-month loans, going up to a 72-month loan can be tempting. However, this is likely a sign you're over-extending yourself.

Here are a few alternatives to taking out a 72-month loan:

Buy A Used Car

Instead of buying a new vehicle, it may be a better option to buy a used car at a lower price point. You may end up paying less for the car, securing a shorter loan term and paying less in interest.

Use A Personal Loan

A personal loan can give you a lump sum of cash to use for practically anything, including a car purchase. Compared to an auto loan, a personal loan can have certain advantages, such as no down payment or risk of car repossession, since the loan is unsecured. However, this also means a personal loan may have stricter credit requirements for the borrower.

Consider Leasing

If you have your heart set on a certain vehicle, you might consider leasing instead of buying. You can usually lease a car for less money upfront, and the monthly payments will be lower. Plus, you’ll have the option to buy out your leased car once your lease has ended.

Pay A Large Down Payment

If you want to take out a long-term loan, consider putting down a large down payment as well. This will help you avoid being underwater on the loan.

Refinance At A Lower APR

And finally, if you already have a 72-month loan and are paying more than you'd like, refinancing is usually an option. Borrowers with a good credit score will qualify for the best terms and rates.

Final Thoughts

Taking out a 72-month car loan is always an option if a 60-month loan would be too hard on your budget, but it comes with its own drawbacks that could put you underwater. Shop around at different dealerships and focus on the full sales price instead of just the monthly payments, and you may find the perfect deal for yourself.

If you think a personal loan would serve you better, you can get started today with a prequalification from Rocket Loans℠.

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.