Are Long Term Car Loans Worth it?

144 month auto loans with exceptionally long terms one of the fastest growing trends in finance for the auto market. For you, these have a natural draw from the low monthly payments, but can actually be vastly detrimental to your long term financial sustainability. However, unless you honestly think you will be driving the exact same car in 2023, is it really a wise decision to spend like you are?


The Wall Street Journal Market Watch ran the numbers in their column earlier this month. As we can see, these costs become more and more steep with longer term loans, which is alarming when the average car loan these days is 65 months.

This is a record high for the automotive loan industry as of the fourth 2012 quarter. Automotive News discusses what these loans mean for the lenders and the borrowers, saying that these long term car loans are double-edged, so to speak. For a borrower, it means trading lower monthly costs for higher interest rates. It also means that if the borrower (you) decides to sell or trade in your car you have to pay a higher amounts to close your account.


To the bank this means that they have to worry about you selling or trading up a bit more closely. The Automotive News article also showed a trend towards increase of costs and interest rate, and can be found in automotive news.

What does this mean for you?

It means to pay attention to the math. Long term loans are fine, if you plan to keep your car for the entire duration. If you plug in some of the loans out there into a calculator, you might get something like for a 60 month loan, monthly payments would be around $500, while for a 72 month loan they would be $420, but by the end the 72 month would cost an additional $605 almost just in additional interest costs, presuming respectable credit up a bit more closely. 

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If we keep climbing the loan length ladder, the more you add to the end of your costs. For instance, if you look at 96 months (8 years) you see that the monthly rates hit $353, but the cost interest at the end is a stunning $6000 in addition to the cost of the vehicle. That’s a lot of extra money for a car that you might not be planning on driving at the end of all this. Much of these numbers are before even fuel, maintenance, and repair or insurance costs.

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Perhaps that money would be better put into your savings account?