How Long Are Car Loans?
Car loans are typically structured in 12-month increments and can last anywhere from two to eight years. However, you may be wondering how long the ideal car loan is.
We'll go over what length your car loan term should be, so you can be prepared when you go to buy an automobile at Ira Toyota of Manchester.
Read through our guide and contact us when you're ready to shop for a vehicle near Amherst, Manchester, or Derry.
Ideal Car Loan Length
The recommended length of time for an auto loan is 60 months or five years. If you took out a 72- or 84-month loan, you'd be paying lower monthly payments, which sounds great. However, you might run into other issues, such as...
Higher Interest Rates
When you take out a 60-month car loan, you agree to a set interest rate. If the loan stretched to 72 months, you can have an interest rate that's more than double the original one.
Plus, we mentioned before that longer car loans can equate to lower monthly payments. However, since interest rates jump up, more interest gets tacked onto the total cost. In the end, you'll be paying more for the car over seven years than you would over five.
Lower Resale Value
When you buy a car, there's a good chance that down the line, you'll want to sell or trade it in for a newer model. If you do this once the car is paid off, you'll have a better chance of getting a high value for a 5-year-old car vs. a 7-year-old car.
New automobiles depreciate naturally over time. When a vehicle is five years old, it'll depreciate a little under 50%. Once you hit seven years, though, it can depreciate as much as over 60%-and that means you'll get less money for the older model when you trade it in.
A big reason for this is that newer used cars are more appealing to buyers, which is especially true when it comes to certified pre-owned (CPO) vehicles. A car that's five years old is a great candidate for becoming CPO, which means it'll be more valuable. Still, once a car hits seven years, it's no longer qualified to become CPO, meaning you'll get less for the trade-in.
When a car gets to be six or seven years old, it'll likely have over 75,000 miles on the odometer. It's true that many vehicles still run well at this point. However, you'll still need to get new tires, brakes, and other maintenance items.
Also, that's not including any unexpected repairs that may pop up. You'll need to pay for any extra services on top of loan payments. If those don't fit within your budget, then you may want to avoid a longer loan term.
Get More Info on Car Loans
While car loans can last for various amounts of time, a 5-year loan may be right for you. However, if you're still not sure, then contact the Ira Toyota of Manchester Finance Center. We'll explain auto loans more thoroughly, so you can get the right one for your new ride.
Don't wait. Get pre-approved for a car loan at our Toyota dealership near Amherst, Manchester, and Derry today!