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What are the advantages of a long-term car loan?
I was thinking of getting a car loan, but I'm not sure which length or term is best. Do long-term car loans—maybe 72 months or longer—have any advantages?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
While many personal finance experts suggest that either a 48-month or 60-month
car loan
is ideal for saving money and balancing interest with monthly payment amounts, longer-term loans also have some advantages.If you’re considering a 72-month loan or longer, you can benefit from:
- Lower monthly payments
- More financial flexibility due to lower monthly payments
- Lower debt-to-income ratio, which can improve your chances of approval for other types of loans
However, this comes as a trade-off. With longer loan terms, you’re also going to spend far more in interest over the life of the loan. You also run the risk of being
upside down
on the car loan, which means you owe more than the car is worth. This can hinder your ability to sell the vehicle in the future, as you will still owe on the loan, even if selling the car
nets you some cash.Another disadvantage is that you will also need to have full coverage car insurance for the duration of the loan, which can get rather expensive over time. You can save money on car insurance by using the number-one-rated car insurance app,
Jerry
. Jerry compares personalized rates from more than 50 top companies and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!View full answer
- Gregory R.
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