Auto loans are becoming longer. The average new-car loan is just under 70 months (5.8 years) according to Experian, with the length coming at a price. “People make the mistake of shopping based on what the monthly cost will be rather than focusing on the total they will pay,” says Greg McBride, chief financial analyst at

The Cost of Longer Car Loans

saving moneyIn three years, the number of auto loans stretching out more than 72 months (6 years) has increased by 14.5 percent. It may seem like you’re saving money by choosing the longer loan term and lower monthly cost, but your interest charges will be much higher.

Auto loans today average around $30,000. When you calculate the interest charges and compare them, it’s shocking how much money you’re throwing away.

If you take out a $30,000 loan at 3.52 percent interest rate, these are the costs over the three most common loan terms:

  • 60-month (5 years): $546 monthly payment, $2,761 interest charges
  • 72-month (6 years): $463 monthly payment, $3,323 interest charges
  • 84-month (7 years): $403 monthly payment, $3,891 interest charges

These numbers may not alarm you, but most lenders will charge a higher interest rate for longer loans. With the same costs on a $30,000 loan, lenders can charge an additional 0.5 percent or more depending on the length of the loan. This may not seem like much, but it can make a big difference in interest charges. Here’s what it looks like:

  • 72-month (6 years): 4.02 percent interest rate, $470 monthly payment, $3,813 interest charges
  • 84-month (7 years): 4.52 percent interest rate, $417 monthly payment, $5,052 interest charges

Bottom Line

The reality is that longer auto loans are deceiving. The lower monthly payment doesn’t lower your interest charges, and could put you in a financial bind in the future.

If you’re looking for an auto loan but worry your credit will get in the way, let Auto Credit Express help. We work with a nationwide network of special finance dealers who have lending resources available to help. Take the first step by letting us connect you with a local dealer; it’s free, and there's never any obligation. Fill out our auto loan request form to get started today.