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It depends on your financial situation. If you need a car now and can’t afford the monthly repayments that come with a shorter term, a long-term car loan might make sense.
But there’s a considerable trade off — a long term costs a whole lot more since there’s more time for interest to add up. Even if you get the same rates and fees as you would with a shorter term, it can cost you thousands of dollars more in the long run.
Here’s how your monthly payments and total loan cost would look for a $35,000 car loan at 12% APR based on four different repayment lengths:
24-month term | 48-month term | 72-month term | 84-month term | |
---|---|---|---|---|
Monthly payment | $1,684 | $922 | $684 | $618 |
Total cost | $39,542 | $44,241 | $49,266 | $51,899 |
There are a few perks of taking out a car loan with a longer term, including:
Consider these potential drawbacks before signing on to a 72-month term or longer:
A long-term car loan usually isn’t ideal, but sometimes it’s the best option when you’re short on cash and need a car now. If that’s the case for you, consider taking some of the following steps to make sure you get the most out of it.
Not sure you want to take on a longer term? Consider one of these alternatives instead:
Getting a long-term car loan can help reduce your monthly repayments. But the risks often outweigh the benefits. You might want to opt for a shorter term if you can afford to pay a little more each month. You can read more about how auto financing works with our guide to car loans.
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