The auto loan industry is changing, but that’s not necessarily a bad thing. Longer-term auto loans can help make buying a car more affordable and give you more peace of mind when it comes to future payments. As per statistics at Lantern by SoFi, “The average car loan length for new vehicles in the first quarter of 2022 stood at 69.48 months, or nearly six years.”
Sometimes a five-year loan isn’t long enough
Sometimes, a five-year loan isn’t long enough. It’s true that the average car loan is under five years, and it’s also true that there’s a reason for this—most people don’t need to borrow money for more than five years. But if you’re buying an expensive car or if you want to pay off your loan faster than usual, then a longer auto loan may be right for you.
The length of your auto loan can affect how much interest you pay over time. Generally speaking, the longer the term of your auto loan (that is, the higher number of months), the less per month or per year that you’ll pay in interest on top of what was already financed by your lender at closing.
By contrast, shorter terms cost more per month but save money on total interest paid over time because each payment includes less principal reduction than longer loans do; plus lenders often offer lower rates on shorter-term loans because their risk exposure is lower since they’re collecting payments for fewer years instead of spreading out those payments across multiple decades as they would with a traditional mortgage or consumer credit card balance.
A longer auto loan can help you afford a better car
Let’s say your monthly payment is $350, which seems like a lot to you. You really want to buy a new car but can’t because of the payments. But what if you were able to lower that payment? What if it was only $300 per month? That would make it much easier for you to afford that car!
If your monthly payment is lower, then the total cost of ownership is also going to be lower because there are fewer months between now and when all payments have been made (assuming no interest). In other words: paying off an auto loan sooner means getting closer to being done with having that debt hanging over your head forever (or at least until it gets repossessed).
Longer loans have lower monthly payments
This means that you can use the extra cash to pay other expenses, like groceries, or even put it into savings. The more money you have in your pocket every month, the more possibilities open up for you!
You won’t have to keep taking out new loans
A long-term auto loan will save you money in the long run, as it allows you to get a lower rate and payment. You won’t have to worry about your loan being paid off before you want it to be, which means that there will be no risk of having to take out another one.
If you’re buying a car, you might be considering whether or not to take out a long-term loan. While it may seem like a daunting task, with the right information, you can make an informed decision about your next purchase. Consider the benefits of long-term auto loans and remember that the longer the term length is for your loan, the more money will be saved over time—and who doesn’t want that?