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Should You Get A 72-Month Car Loan?

Miranda Crace5-Minute Read
UPDATED: June 02, 2024


If you need to buy a new car but don’t have the money to pay for it in cash, a car loan can act as a lifesaver. And getting an auto loan with a repayment period that’s on the longer side can be an easy way to keep your monthly loan payments low.

The standard auto loan is 60 months, or 5 years, but car loans featuring a longer term are available in many cases. For example, it might be possible to get approved for a car loan that stretches from 1 – 3 years beyond the standard term. But while choosing a 72-month or 84-month loan, in particular, may sound appealing, is it the best choice financially?

The answer to that question depends on your credit history as well as your financial goals. Let’s explore what taking out a 72-month car loan, specifically, can mean for your finances, as well as a breakdown of 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 benefit of taking out a 72-month loan is that it can allow you to buy a nicer car while lowering your monthly payments. Some car dealers offer such long-term loans as a way to reduce monthly payments without lowering the car’s sale price.

If you want to pay as little as possible per month or if you have bad credit, a longer-term loan might be your best option. However, extending the repayment period will also bump up the total amount of interest you end up paying on the loan.

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Is A 72-Month Car Loan A Bad Idea?

Taking out a 72-month auto loan can make sense in some situations, but most financial experts don’t consider it a good idea, generally speaking. Next up are three major drawbacks of a 72-month loan.

1. You May End Up Underwater On Your Loan

Cars depreciate in value over time. Depending on your initial loan amount, interest rate and how quickly and much your car depreciates, the amount you still owe on a 72-month auto loan might come to exceed the car’s resale value. This is what’s known as being “underwater” or “upside down” on the loan, or having negative equity.

New cars depreciate especially quickly, losing a lot of their value within the first couple of years. Some experts say a car loses 10% of its value the moment you drive it off the lot. Depreciation rates differ by car, so your vehicle could lose its value even faster.

If you do decide to take out a 72-month loan, it may be a good idea to purchase gap insurance, which covers the difference between the car’s depreciated value – the amount your car insurance provider would pay – and what you owe on the vehicle if it’s totaled, damaged or stolen.

2. 72-Month Car Loan Rates Are Typically High

Lenders typically believe that borrowers who take out a loan with a longer repayment term are more likely to default on the loan. To offset the added risk that lenders tend to perceive, they may charge a higher interest rate or annual percentage rate (APR) than they otherwise would. A high interest rate means you’ll end up paying more for the total cost of the car when all is said and done and you’ve made all your loan payments. Paying more money in interest has no benefit, and some people consider it to be wasted money.

3. You May Have To Pay For Car Repairs While Still Paying Your Loan

If you take out a long-term auto loan, your repayment term could be lengthier than the car’s warranty, leading to financial problems if you have to cover repair costs out-of-pocket while still making car payments.

For instance, let’s say the warranty lasts 60 months but your car loan has a 72-month term. When the warranty ends, you may have to pay for a major car repair on top of your monthly car payments. Fortunately, many auto repair financing options are available if you find yourself in this situation and need a little extra help, but the downside of this strategy is that you may have to pay repair financing costs in addition to your car payment.

Alternatives To A 72-Month Auto Loan

If you’re thinking of buying a car but the monthly payments on a 60-month loan are too high, going up to a 72-month loan can be tempting. However, if you feel that this is necessary, it could be a sign that you’re overextending yourself financially. By choosing this option, you’ll also end up paying more interest over the life of the loan. Thankfully, though, you have other auto financing options to choose from.

Below are a few alternatives to taking out a 72-month loan.

Buy A Used Car

Instead of buying a new vehicle, you may come out better buying a used vehicle at a lower price point. This would likely mean not only paying less for the car but also securing a shorter loan term and paying less in interest. Many dealerships also offer “certified pre-owned” vehicles, which have relatively low mileage and have undergone a thorough inspection before being sold. Some may even come with a limited warranty.

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 usually has a higher interest rate, but if a personal loan is unsecured – which is most often the case – there’s no risk of your car being repossessed.

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 lower monthly payments. Plus, you may have the option to buy out your leased car – through what’s known as a lease buyout – once your lease ends.

Make A Large Down Payment

If you want to take out a long-term loan, consider making a large down payment. Doing this can significantly reduce the size of your loan and help you avoid being underwater on the loan.

Refinance For A Lower Interest Rate

If you already have a 72-month loan and are paying more than you’d like, refinancing may be a good option – especially if you have better credit than when you were approved for your current loan. Borrowers with a good or excellent credit score almost always qualify for the best loan rate and terms.

Get A Preapproval Letter Before Buying

Dealer financing can be convenient, but it may not always offer the best interest rate. Getting preapproved for an auto loan before you arrive at the dealership means that the dealer will need to meet or beat the terms already offered to you when they offer you their financing options.

Final Thoughts

Taking out a 72-month car loan may be an option if a 60-month loan would be too hard on your budget. However, a 72-month car loan comes with its own drawbacks that could put you underwater. Focus on the full sales price instead of just the monthly payments, and check with multiple dealerships for the best car at the best price. You might also want to get preapproved by a bank, credit union or online lender.

If you think a personal loan would serve you better, you can get started today with 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.