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Do you need to take out an 84-month auto loan? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing original and objective content. This allows users to conduct research and compare information at no cost and help you make financial decisions with confidence. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that compensate us. This compensation could affect how and where products are displayed on this website, for example for instance, the sequence in which they appear in the listing categories in the event that they are not permitted by law. This applies to our mortgage or home equity, and also other home lending products. However, this compensation will not influence the information we provide, or the reviews you read on this site. We do not include the universe of companies or financial offerings that could be accessible to you. SHARE: Standret/Shutterstock

5 min read published March 02, 2023.

Ben Luthi Ben Luthi Written by Contributing writer Ben Luthi is a personal travel and finance writer who is passionate about helping others discover how to live their lives more fully. His writing has been featured in several publications, including U.S. News & World Report, USA Today, Yahoo! Finance and other publications. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to manage their finances by providing concise, well-studied facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee

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We receive compensation for the placement of sponsored products andservices or when you click on certain hyperlinks on our website. So, this compensation can affect the way, location and in what order items appear within listing categories, except where prohibited by law for our mortgage, home equity and other home loan products. Other factors, like our own proprietary website rules and whether the product is available within the area you reside in or is within your personal credit score may also influence how and when products appear on this website. We strive to provide an array of offers, Bankrate does not include information about every financial or credit item or product. Longer terms mean lower monthly payments for an auto loan. They can have some benefits for the right buyer -however, you should expect to pay more overall. Before you choose for an 84-month loan consider the tradeoffs and alternatives. What is an auto loan? They’re basically identical to any other auto loan. A 84-month auto loan stretches the repayment period by seven years. The lender will amortize your loan over the course of this time to determine the amount you’ll pay each month in principal and interest. For instance, let’s consider an auto loan with an 3.49 percent interest rate. If you choose to go for a 60-month term to repay, your monthly payment would be $364. You can extend the period to 84 months however, and your monthly payments would decrease to $269. However, that 60-month period will cost you just $1,825 in interest. As there’s more space for the interest rate to pile up, an 84-month period will be more costly: You’ll end up paying $2,571 — approximately $750 more. The reasons not to take 84-month auto loans Although a longer auto loan period means lower monthly payments but it can be a problem in the future. Here are some potential pitfalls to avoid: More expensive Although your monthly payments will be less with the length of the loan, the total interest charged will be higher. However much or how little you finance, you’re going to pay more interest for a longer loan. It might not suffice to be a deal breaker when faced with a more affordable payment every month however it’s money that can be used elsewhere. Additionally the 84-month auto loan rates tend to be more expensive because they are riskier for lenders. This is assuming it’s offered at all. Depreciation On an average an automobile that is brand new can lose more than 10% of its value within the first month following your drive it off the lot according to . You’ll lose 20 percent -or more in the first year and 60 % within the 5th year. With a lower monthly installment, you have an increased risk of . If you decide to sell the vehicle or it is completely destroyed, you’ll have to pay for the difference out of your pocket. Repair problems The older the vehicle is, the more expensive the repairs will be. With an 84-month term, there’s a much higher chance of having to shell out for while you still have the monthly installment. If you’re working with limited funds and no reserve, it can put a big pressure on your finances. Expired warranty There are some new vehicles with lengthy warranties, but most are at least three years, or 36,000 miles. With an 84-month loan you’ll be paying off your vehicle long after the warranty expires. Beware of a loan duration that is longer than the length of your car’s warranty. If you’re purchasing a there’s a good chance you won’t have any warranty issues to be concerned about. This makes expected depreciation and the average repair cost more important — so do not skimp on your research. Kelley Blue Book and Edmunds both offer estimates on the total cost to own that are higher than the general repair costs covered by the warranty. Benefits of an auto loan There isn’t all doom and gloom. There are a few advantages of an 84-month term you should take into consideration: lower monthly payments. Seven years is an extended period which means you are able to borrow more money and still have a relatively low monthly payment. If you’re on the budget tight the 84-month period could reduce monthly expenses. Lower debt-to-income ratio. If you take out an 84-month auto loan and monthly payments, your expenses will be lower compared to your earnings. A low rate could make it easier to qualify to get future loans. Competitive rates. When interest rates are at a low it is logical to borrow money for as long as is possible. You could use the savings to pay off higher-interest loans. Be aware that auto loans will carry higher interest rates over auto loans with shorter terms. Consider an 84-month auto loan There are circumstances where you are on a tight budget or don’t have a lot of room to negotiate with your car dealer. If you are limited in the options available, a long-term auto loan could be the most suitable alternative. A longer-term loan is the only way to fit monthly payments into your budget. There’s no penalty when you pay off your car loan is paid off in the early. The length of the term lets you afford an improved, more reliable car. The car you own has a lengthy warranty, minimizing the overall cost of repairs. You could get a lower interest rate and want to invest the difference for an increase in the value of your investment. Other auto loan options Use an to understand what a longer term will cost you. If you’re not certain if whether a longer period is suitable for you, even with the most favorable 84-month option, there are alternatives to think about: Wait and save. If you’re stuck on a specific model but can’t pay for it with a longer term, consider waiting to accumulate enough cash to pay for a larger down cost. Use the auto loan to determine the amount it could lower your monthly payments. Opt for a cheaper car. If you aren’t able to save for a larger down payment, consider changing your plans towards a more affordable car that lets you finance for a shorter period. Look for a place in your budget. If you haven’t done so taken a look at your expenses and income over the last couple of months and see if there are areas where you can reduce your expenses in order to accommodate a higher monthly payment. Instead of purchasing, lease. have shorter time frames than auto loans in general — roughly three years, according to . Despite the shorter term however, they are able to pay lower monthly costs because they’re based on the vehicle’s depreciation and not its sales price. What should you consider when choosing the right auto loan term length ? Consider what you’re financing, the interest rate along with your spending plan. It’s not uncommon for buyers to opt for more lengthy terms for their auto loans However, it’s not worth giving in to the pressure of sales. The shorter your auto loan term the better. Not only does it guarantee you pay less interest, but it also results in paying off the debt earlier. You’ll also have additional cash each month to use towards other obligations and expenses. If you won’t be in a position to pay for a larger monthly payment, you could opt for longer repayment terms starting at the beginning, and then when your budget is able to allow. If you’re lender doesn’t charge a prepayment cost You can also make the payment on your loan earlier and save on interest. When you think about the length of your term, keep your current situation as well as your long-term goals and needs in your mind. There’s no auto loan length that is ideal for everyone, so understanding your financial situation can help you find the best path forward. In the end, even though you’ll pay lower monthly installments with an 84-month car loan but you’ll pay more in interest. There’s also the risk of owing more on the loan than your car is worth, and possibly large repair bills. If you are considering a long auto loan time frame, consider an earlier term to save money overall. Find out more


Written by the writer who contributed to the article. Ben Luthi is a personal finance and travel writer who loves helping people learn how to live life fully. His writing has been featured in a variety of publications that include U.S. News & World Report, USA Today, Yahoo! Finance, and many more. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers gain confidence to manage their finances by providing concise, well-studied facts that break down otherwise complicated topics into digestible pieces.

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