Reasons To Avoid A Long-Term Auto Loan

Instead of softening the blow of rising vehicle prices, long-term auto loans mask the overall financial cost of your loan, despite the appeal of lower monthly payments.

According to The Federal Reserve of New York, the total balance on all consumer auto loans hit $1.67 trillion in 2025. ^[1]

The average new vehicle loan amount reached $43,582 in Q4 2025, up by $1,882 from $41,700 in the previous quarter. ^[2] As car prices and interest rates have kept climbing steadily in recent years, it’s become more difficult for some car buyers to afford auto loans. This has led to some borrowers seeking out long-term auto loans as a way to reduce their monthly payments, but these loans can come with certain downsides. ^[3]

In this article, we’ll discuss how long-term auto loans work, and why they may not be the best option for everyone.

Key points

• Long-term auto loans increase your total cost. While longer loan terms lower monthly payments, they typically come with higher interest rates, meaning you pay more overall for the vehicle by the time the loan is paid off.
• Long-term loans put you at risk of negative equity. Cars depreciate faster than long-term loan balances are paid down, which can leave you owing more than your vehicle is worth — a problem if you want to sell, trade in, or if the car is totaled.
• There are alternatives to long-term financing. Choosing a less expensive or used vehicle, saving for a larger down payment, securing a lower interest rate, or leasing are all options that can make monthly payments more manageable without the drawbacks of a lengthy loan term.

Table of contents

• How long can you get a car loan for?
• Drawbacks of long-term car loan
• Is a long-term auto loan a good idea?
• How your credit score impacts auto loan interest
• Long-term auto loan alternatives
• Choose a car that fits your budget

How long can you get a car loan for?

A typical car loan length can range from anywhere between 2 to 9 years (24 to 96 months). The length of an auto loan can vary from one lender or car dealership to the next, but the average loan term for a new vehicle is 68.94 months and the average loan term for a used vehicle is 67.68 months, according to Experian data from Q4 2025.^[3]

Even though 72- and 84-month auto loans have become more common than shorter-term loans, most car dealers consider anything longer than 60 months to be a long-term car loan. Here’s a breakdown of short-term versus long-term car loan durations:

Short-term car loans:

• 24 Months
• 36 Months
• 48 Months

Long-term car loans:

• 60 Months
• 72 Months
• 84 Months
• 96 Months

^[4]

Drawbacks of long-term car loans

Most car buyers want lower monthly car payments. Although extending your loan over a longer term reduces your monthly payment, your auto loan length can affect the total cost of your loan and possibly the value of your car. The following reasons help explain why a loan length of more than 60 months may not make sense as part of your overall financial goals.

1 - Higher interest charges

Longer auto loans often come with higher interest rates than shorter-term loans. Even though you may enjoy lower monthly payments, the higher rate means you end up paying more in total interest. If you have a lower credit score, car loan interest rates can increase further.

2 - You may owe more than the car is worth

With long-term auto loans, you may not be paying down your principal enough to stay above market value. You may end up owing more on your car than what the car is worth, referred to as “negative equity” or being “upside down” on your loan.

If you have negative equity and you decide to sell your car, you risk owing money to the lender, and if your car becomes totaled in an accident, the money you get from the car insurance company may not cover the remainder of your auto loan. In both cases, you end up paying loan payments for a car you no longer have access to.

3 - Unexpected expenses over the length of the loan

Regardless of how well your car maintains its value and reliability, unexpected expenses can affect your finances over the life of the loan. Your ability to pay your loan could be impacted by unexpected costs, such as medical bills, or a change in your job situation that decreases your income.

4 - Car depreciation

Although some cars hold their value better than others, both new and used cars lose their value as they age, known as depreciation. Not all cars lose value at the same rate, but, on average, new cars lose 45.6% of their value after five years in a 2025 study.^[5]

If you decide to trade in your vehicle or sell it, you may find yourself upside down on your loan, owing more than what it's worth. In this case, you have to make up the difference between the remainder of your loan and the value of your car.^[6]

Is a long-term auto loan a good idea?

While you may have smaller monthly payments, a longer-term auto loan will cost you hundreds of dollars more in total interest than a short-term loan.^[5]

Let’s use a $40,000 new car as an example, assuming you have no down payment, and your interest rate is 5%. The table below shows how different term lengths can impact your monthly payment and the total amount of interest you pay.

With a 48-month loan term, your estimated monthly payment would be $921, and your total interest would be $4,216. If you extended the loan term to 84 months, your estimated monthly payment would be considerably cheaper at $565, but you’d pay $3,274 more in interest over the course of the loan (a total of $7,490 in interest).

Source ^[7]

Data note: Figures are estimates based on Bankrate’s Auto Loan Calculator as of February 2026 and are subject to change. These figures are only to demonstrate how different term lengths can impact loan payments and interest if all other factors remain the same. In many cases, a longer loan term would also come with a higher interest rate.

How your credit score impacts auto loan interest

People who have a higher credit score may receive better car loan terms (low-interest financing) on a car purchase. If you’re considering a long-term auto loan, this can help reduce the overall cost of your car purchase. Keep in mind, however, that regardless of credit score, more total interest still accumulates over time with a longer-term loan.^[8]

Long-term auto loan alternatives

If you’re purchasing a car, you can find ways to reduce your monthly car payments that don’t involve long-term loans. From saving up for a larger down payment to looking for a lower interest rate, these sections explain the auto loan alternatives you can consider.

Choose a less expensive or used car

Because new cars depreciate more quickly during the first year, you may want to consider a used car. By selecting a used car, the bulk of the depreciation has already occurred and the total amount of the car will be lower, which may give you more room to make a larger down payment compared to the price of the car.

Secure a lower interest rate

You may be able to refinance your loan to a better term. If your credit has improved, you may have a chance to obtain a lower interest rate, which could reduce the amount of your monthly payment. Shop around for the best interest rates or contact your bank to see if you can get preapproved for an auto loan before going to the dealership.

Save up for a bigger down payment

The more money you can save for a bigger down payment, the smaller your monthly payments will be, which can make your car payments more manageable. In addition, you pay less in total interest over the life of your loan. Owing less makes it easier to pay off your car loan early.^[9]

The table below shows an example of how reducing your loan size by $5,000 could lower your monthly payment, based on a 48-month new car loan with a 5% interest rate.

Source ^[7]

Data note: Figures are estimates based on Bankrate’s Auto Loan Calculator as of February 2026 and are subject to change.

Lease instead of buying a car

If you want a new car, leasing a car may be an option that secures lower monthly payments. Typically, the manufacturer’s warranty covers a leased vehicle, and leasing may also allow you to drive a more upscale model.^[10]

Although leasing allows you to enjoy a new car leasing does have its drawbacks, such as limits on the number of miles you can drive and additional charges when you turn in the vehicle at the end of the lease.^[10]

Choose a car that fits your budget

Whether you’re already in a long-term loan, struggling to make car payments or find yourself upside down on your car loan, you may have options to lower your interest rate or monthly payment.

If you’re looking to get a new car loan, shop around — both for a car that fits your budget and a loan that fits your financial plan, and consider tools offered by Self for building credit, which can help you qualify for a good interest rate whether you buy or lease your next new vehicle.

Sources

1. New York Fed, “Credit Card and Auto Loans” https://www.newyorkfed.org/microeconomics/topics/credit-cards-auto-loans Accessed February 18, 2026
2. Experian, “Adapting to Change: Subprime Borrowers Re-entered the Market in Q4 2025” https://www.experian.com/blogs/insights/adapting-to-change-subprime-borrowers-re-entered-the-market-in-q4-2025/ Accessed April 24, 2026
3. Experian, “What’s the Average Length of a Car Loan?” https://www.experian.com/blogs/ask-experian/what-is-the-average-length-of-a-car-loan/ Accessed April 24, 2026
4. NerdWallet, “5 Reasons to Say No to Long Car Loans” https://www.nerdwallet.com/auto-loans/learn/5-reasons-say-no-long-car-loans Accessed February 18, 2026
5. iSeeCars. “Top 10 Cars That Hold Their Value Best” https://www.iseecars.com/cars-that-hold-their-value-study#:~:text=iSeeCars%20found%20that%20the%20average,to%2049.1%20percent%20in%202020. Accessed. July 18, 2022.
6. PNC, “Upside Down Card Loans” https://www.pnc.com/insights/personal-finance/borrow/upside-down-car-loan.html Accessed February 18, 2026
7. Bankrate, “Auto Loan Calculator” https://www.bankrate.com/loans/auto-loans/auto-loan-calculator/ Accessed February 18, 2026
8. Experian, “What is a Good Credit Score for an Auto Loan?” https://www.experian.com/blogs/ask-experian/what-is-a-good-credit-score-for-an-auto-loan/ Accessed February 18, 2026
9. SoFi, “How Down Payment Amounts Affect Car Loans” https://www.sofi.com/learn/content/down-payment-size/ Accessed February 18, 2026
10. Consumer Reports. “Leasing vs. Buying a New Car,” https://www.consumerreports.org/buying-a-car/leasing-vs-buying-a-new-car-a9135602164/. Accessed April 27, 2022.

About the author

Ana Gonzalez-Ribeiro, MBA, AFC® is an Accredited Financial Counselor® and a Bilingual Personal Finance Writer and Educator dedicated to helping populations that need financial literacy and counseling. Her informative articles have been published in various news outlets and websites including Huffington Post, Fidelity, Fox Business News, MSN and Yahoo Finance. She also founded the personal financial and motivational site www.AcetheJourney.com and translated into Spanish the book, Financial Advice for Blue Collar America by Kathryn B. Hauer, CFP. Ana teaches Spanish or English personal finance courses on behalf of the W!SE (Working In Support of Education) program has taught workshops for nonprofits in NYC.

About the author

Becca has over 10 years of experience as a content writer, working across various industries including finance, digital marketing, education, travel, and technology. Her work has been featured in publications including Forbes, Business Insider, AOL, Yahoo, GOBankingRates, and more.

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