48 vs 60 vs 72 vs 84 Month Loans

Longer terms mean lower payments, but the real cost might surprise you.

The Loan Term Trap

Car dealers love to focus on monthly payment. "Only $350 a month!" sounds affordable. But that low payment often hides a costly truth: you're paying thousands more by stretching out the loan.

The trend: Average auto loan terms have increased from 48 months (2010) to 72 months (2024). That's not helping consumers. It's making cars more expensive.

The Real Cost Comparison

For a $30,000 Car at 7% Interest

The 84-month loan costs $3,588 more than the 48-month loan. That's nearly enough for a down payment on your next car.

Breaking Down Each Term

48 Months: The Smart Choice

Monthly payment: Highest Total cost: Lowest Best for: Buyers who can afford higher payments

Pros:

• Pay the least total interest
• Build equity faster
• Own the car free and clear in 4 years
• Less risk of being underwater

Cons:

• Higher monthly payment
• May limit how much car you can buy

Consider 48 months if:

• You can comfortably afford the payment
• You want to minimize total cost
• You prefer shorter financial commitments

60 Months: The Middle Ground

Monthly payment: Moderate Total cost: Moderate Best for: Most buyers seeking balance

Pros:

• Reasonable monthly payment
• Manageable total interest
• Standard term with most lenders
• Good balance of affordability and cost

Cons:

• More interest than 48-month
• Takes 5 years to own outright

Consider 60 months if:

• 48-month payment is too tight
• You want a reasonable balance
• You plan to keep the car 7+ years

72 Months: Proceed with Caution

Monthly payment: Low Total cost: Higher Best for: Only if you must, for reliable used cars

Pros:

• Lower monthly payment
• May help you afford a safer, more reliable car

Cons:

• Significantly more total interest
• Higher risk of negative equity
• Car may need major repairs while you're still paying

Consider 72 months if:

• You need a reliable car now
• 60-month payment doesn't fit budget
• You're buying a vehicle known for longevity

84 Months: Generally Avoid

Monthly payment: Lowest Total cost: Highest Best for: Rarely anyone

Pros:

• Lowest possible monthly payment

Cons:

• Pay thousands more in interest
• Almost guaranteed negative equity for years
• Car may be worthless before loan ends
• Often higher interest rates for 84-month terms

Consider 84 months only if:

• You have no other options
• You understand and accept the extra cost
• The car will last the full term

The Negative Equity Problem

Longer loans increase your risk of being "underwater" (owing more than the car is worth).

Typical depreciation vs. loan balance:

With 48 months: You have positive equity after 18 months. With 72 months: You're underwater for nearly 4 years.

Interest Rate Differences by Term

Lenders often charge higher rates for longer terms because they're riskier:

The double hit: Longer terms mean more interest AND higher rates.

How to Choose the Right Term

Step 1: Calculate What You Can Afford

Use the 20/4/10 rule:

• 20% down payment
• 4-year (48-month) term
• 10% of gross income for all car costs

Step 2: Consider Your Situation

Choose shorter term if:

• You have stable income
• Emergency fund is solid
• You want to minimize costs
• You keep cars 10+ years

Consider longer term if:

• Cash flow is tight
• You need a reliable car now
• You'll make extra payments when possible

Step 3: Run the Numbers

Compare total cost, not monthly payment:

Monthly payment x term = Total paid Total paid - loan amount = Total interest

Step 4: Plan for Extra Payments

If you must take a 72-month loan, plan to pay extra:

• Even $50/month extra shortens the term
• Pay like it's a 60-month loan when you can
• Apply windfalls to principal

The "Affordable Payment" Myth

Dealers use longer terms to make expensive cars seem affordable:

The pitch: "This $45,000 truck is only $550/month!" The reality: That's an 84-month loan at 8% totaling $46,200 in payments plus $12,600 in interest = $57,600 total.

A better approach: Decide what you can truly afford, then shop for cars that fit.

When Longer Terms Make Sense

Scenario 1: Lower Payment, Same Payoff Plan

Take the 72-month term for flexibility, but pay like it's 48 months. If income drops, you have a lower minimum payment to fall back on.

Caution: This requires discipline. Most people just pay the minimum.

Scenario 2: 0% Financing Promotions

If you qualify for 0% APR on a new car, the term doesn't affect interest cost. A 72-month 0% loan costs the same as 48-month 0%.

Caution: 0% deals usually require excellent credit (750+).

Scenario 3: Buying a Reliable Used Car

A 3-year-old Toyota or Honda can easily last 10+ years. A 72-month loan on a $20,000 used car may make sense if it keeps payments manageable.

Term Length and Car Ownership

Match your term to how long you'll keep the car:

If you trade frequently, longer terms guarantee negative equity at trade-in time.

The Best Strategy

For most buyers:

1. Save 20% down payment
2. Choose a 48-60 month term
3. Buy less car if needed to fit budget
4. Make extra payments when possible

If you need a 72+ month term:

1. Buy a reliable used car, not new
2. Plan to make extra payments
3. Don't finance more than the car is worth
4. Consider whether you can truly afford this purchase

The Bottom Line

That low monthly payment isn't a deal. It's a trap that costs you thousands.

The math is simple:

• 48 months: Lowest total cost
• 60 months: Reasonable compromise
• 72 months: Expensive, use cautiously
• 84 months: Avoid if possible

Before signing for a long-term loan, ask yourself: "Can I really afford this car, or am I just stretching payments to make it seem affordable?"

If you need 84 months to afford the payment, you probably need a cheaper car.

Last updated: January 2025