A 72-month loan will invariably have a lower monthly payment than a 60-month loan for the same vehicle. The Depreciation Dilemma Extending the loan term also creates a precarious financial situation known as being "upside down" or "underwater" on the loan.
New Car Loan Length Vs Ownership Period: Balancing Payments and Depreciation
It also increases vulnerability in the event of an accident, as the insurance payout may not cover the remaining loan balance. In some segments, particularly for luxury vehicles, terms extending to 84 months are not uncommon, with a notable percentage of all new loans falling within the 73 to 84-month bracket.
Consumers often underestimate the total cost of ownership, focusing solely on the monthly figure without accounting for the interest paid over the extended term. Additionally, attractive low-interest rate promotions, often available for shorter lease terms or specific financing packages, encourage consumers to lock in a manageable payment for a longer period, even if the interest rate is slightly higher.
New Car Loan Length Vs Ownership Period: Matching Your Term to Your Ride
To keep monthly payments within a manageable budget, buyers are forced to stretch the repayment period over a longer horizon. New cars depreciate rapidly, losing a significant portion of their value in the first few years.
More About Average new car loan length
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More perspective on Average new car loan length can make the topic easier to follow by connecting earlier points with a few simple takeaways.
