Is it smart to finance a car for 72 months? (2024)

Is it smart to finance a car for 72 months?

Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.

Is it smart to do a 72 month car loan?

A 72-month auto loan isn't always the best option. Compared to a 60-month loan, you'll pay interest for another 12 months, which increases the overall cost of borrowing. A 72-month auto loan also puts you more at risk of being upside-down on the loan, which is owing more than your vehicle is worth.

What is the longest you should finance a car?

Even though the majority of car buyers are going with long-term car loans, is an auto loan of 72 months or more a good idea for you? NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months.

Is it a smart idea to finance a car?

Key takeaways. An auto loan can benefit you because it spreads out the expense of the car, leads to ownership and can help you improve your credit score. Some drawbacks to watch out for include being stuck with the same car for longer, possibly expensive monthly payments and the risk of damaging your finances.

Is 7 years too long to finance a car?

Before signing off on a car loan that's as long as 84 months, make sure you've found the right car for your needs and consider whether you will want to drive that same vehicle throughout the entire term. And the older your car gets, the more likely it is to need expensive repairs. Seven years is a very long time.

How long does it take to pay off a 72 month car loan?

About seven out of 10 people borrow money to buy their cars, and a car loan is one of the largest financial obligations you can have. If you're one of them, you may have a loan that will take you 60 or 72 months to pay off. That's five to six years! That's too much interest to have to pay.

What is the smartest car loan term?

NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars — although that can be a challenge for some people in today's market with high car prices. Ultimately, choosing the best auto loan term depends on balancing cost, affordability and your specific needs.

How long does it take to pay off a $30000 car?

Provided the down payment is $5,000, the interest rate is 10%, and the loan length is five years, the monthly payment will be $531.18/month. With a $1,000 down payment and an interest rate of 20% with a five year loan, your monthly payment will be $768.32/month.

What is the 20 4 10 rule?

Basically, the rule goes that you provide a down payment of 20% of the balance, sign a loan for a four-year period, and pay no more than 10% of your monthly income on car expenses. These expenses include any money you put towards your new vehicle, including gas, insurance, and loan payments.

How much is too much for a car payment?

Financial experts recommend spending no more than about 10% to 15% of your monthly take-home pay on an auto loan payment.

When should you not finance a car?

When an auto loan is a bad idea
  1. You can't afford the car. ...
  2. The interest rate is too high. ...
  3. You could be stuck with a long term. ...
  4. You want to build more credit. ...
  5. You are planning to use your cash reserves to buy the car. ...
  6. There is a deal on financing.
Mar 1, 2024

What is a good interest rate for a car for 72 months?

Auto Loan Purchase Interest Rates
Payment PeriodPurchase APR* "As Low As"Payment per $1,000
Up to 66 Months6.99%$18.29
Up to 72 Months7.24%$17.16
Up to 75 Months7.49%$16.74
Up to 78 Months7.74%$16.36
4 more rows

Is it better to pay cash or finance a car?

Paying cash for your car may be your best option if the interest rate you earn on your savings is lower than the after-tax cost of borrowing.

How much is 72 months?

72 months equals 6 years. To figure this out, we recognize the well-known relationship between months and years. That is, there are 12 months in 1 year. Since there are 12 months in a year, 1 month would be 1/12 of a year.

How many years is 72 months?

72 months equals 6 years, and 84 months equals 7 years.

What are the disadvantages of a large down payment on a car?

Making a large down payment on a car may also limit your financing or refinancing options. Some lenders may not offer financing if you propose to make a down payment that the lender deems too large. You might not meet a lender's financing requirements if you're seeking to put 90% down on a vehicle that costs $25,000.

What happens if I double my car payment every month?

Your car payment won't go down if you pay extra, but you'll pay the loan off faster. Paying extra can also save you money on interest depending on how soon you pay the loan off and how high your interest rate is.

Can I pay off a 72 month loan early?

Can you pay off a 72-month car loan early? Yes, you can pay off a 72- or 84-month auto loan early. Since these are long repayment terms, you could save considerable money by covering the interest related to a shorter period of time.

Can I pay half my car payment twice a month?

Paying half of your monthly car payment twice a month instead of a full payment each month can help you pay off your car loan early. That's because when you make payments on a biweekly basis, you make 26 payments that add up to 13 monthly payments instead of 12.

What is average car payment?

The average monthly car payment is $738 for new cars and $532 for used. Several factors determine your payment.

What score do banks use for auto loans?

FICO is an acronym that stands for: Fair Isaac Corporation, the company that developed the FICO® credit scoring. FICO® credit scores are the auto industry standard for determining a potential buyer's creditworthiness.

What is a typical car loan interest rate?

The average auto loan interest rates across all credit profiles range from 5.64% to 14.78% for new cars and 7.66% to 21.55% for used cars.

What happens if I pay an extra $100 a month on my car loan?

Paying extra on your auto loan principal won't decrease your monthly payment, but there are other benefits. Paying on the principal reduces the loan balance faster, helps you pay off the loan sooner and saves you money.

What is a good downpayment on a 30k car?

Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

Is $1,000 car payment bad?

For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.

References

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