Buying a used car is an exciting experience. During the car buying process, you will need to make a number of important decisions. For instance, you will need to decide what type of vehicle you want, where to buy it from, how much you want to spend, and of course, how you will finance it. 

If you are planning on taking out a loan to purchase a used car, you also need to choose a lender, figure out how much you can put down, and decide on a loan term. A loan term is the length of time you have to repay the money you borrow. It is typically expressed in months. For example, you may see a used car loan with a term of 36 months, which means you have three years to repay the money you borrow.

Choosing a loan term may not seem like an important decision, but it can impact the total cost of your loan, so it’s crucial that you choose the right term for you. How long are used car loans? What are the pros and cons of a long-term used car loan? Here’s what you need to know:

What is the Average Length of a Used Car Loan?

According to Experian, roughly 42% of used car shoppers are taking out loans with terms that range from 61 to 72 months. Nearly a quarter of used car shoppers are choosing loans with even longer terms between 73 to 84 months. Right now, the most common term for a used car loan is 72 months, or six years.  

Research has shown that the average length of a used car loan has increased steadily over the last several years. In 2019, the average length of a used car loan was 64.82 months, but in 2020, the average increased by about two weeks to 65.30 months. The increase in the average loan term is even more significant when looking at new car loans. During this same time period, the average new car loan term increased by roughly two months. 

How Long Are Used Car Loans

What Are the Benefits of a Long-Term Used Car Loan?

There are several benefits to choosing a used car loan with a longer term, including:

  • More affordable car payments. Because you are given more time to repay the money you borrow, your monthly payments will be lower with a long-term used car loan. This is one of the main reasons why long-term used car loans are appealing to consumers.
  • Frees up money in your budget. If your monthly payments are low, you may be able to free up money that you can use to pay down other debts.
  • You can choose a more expensive vehicle. Because the monthly payments are lower, you may be able to afford a more expensive vehicle if you choose a loan with a longer term. 
How Long Are Used Car Loans

What Are the Drawbacks of a Long-Term Car Loan?

The average used car loan term may be increasing, but that doesn’t mean you should choose a loan with a longer term. There are a number of drawbacks to long-term car loans, including:

  • Potential to go “underwater” on your loan. Being underwater on your loan means you owe more on your vehicle than it is worth. The longer the loan term, the longer it will take you to build equity in your vehicle, which means you are at a greater risk of going underwater.
  • Interest rates are higher. Long-term loans typically come with higher interest rates than short-term loans. This is because a long-term used car loan carries more risk for the lender than a short-term loan. If you choose a loan with a term of over 60 months, you may end up with a much higher rate than you anticipated.
  • You will pay more in interest. Regardless of the interest rate, the longer the term, the more you will pay in interest. Shortening the term could drastically lower the total cost of your loan and save you a significant amount of money. 
  • You will need to budget for repairs. If you’re buying a used car and keeping it for six to seven years, you will need to remember to budget for repairs and maintenance. Some people may not be able to afford their monthly car payment when these extra costs are added in.

These are some of the many reasons why you may want to reconsider choosing a used car loan with a long term.

What Other Factors Should You Consider When Choosing a Used Car Loan?

If you’re planning on financing a used car, it’s in your best interest to request quotes from multiple lenders. Then, you can compare these quotes to determine which one is right for you.

The loan term isn’t the only factor you should consider when comparing used car loan quotes. It’s also important to consider these factors:

  • Monthly payment: Compare the monthly payment on each of your quotes. You should never choose a loan with a monthly payment that you cannot afford to make. However, this doesn’t mean you should always choose the loan with the lowest monthly payment. Remember, a low monthly payment typically means a longer term, so you may end up paying more in interest. 
  • Annual Percentage Rate (APR): The APR is the annual cost of borrowing money expressed as a percentage of the principal. It includes both interest and other fees associated with borrowing money. The lower the APR, the less you will pay over the course of your loan.
  • Special rules or restrictions: You also need to consider any special rules or restrictions that the lender may place on your used car loan. For instance, some lenders will only allow you to purchase a vehicle from a dealership within their network. Other lenders may not allow you to purchase a used car that is more than 10 years old.

By analyzing these factors, you should be able to narrow down your options and choose the right used car loan for you.

How Long Are Used Car Loans

How to Apply for a Used Car Loan

If you’re ready to secure financing, follow these steps to apply for a used car loan through LoanCenter:

  1. Get pre-qualified. It only takes a few minutes to get pre-qualified for a used car loan. All you need to do is submit information about your employment and income using the form on our website. 
  2. Choose a loan structure. Once you’re pre-qualified, you can customize your loan by choosing a loan structure that works best for you. If you are second guessing your choices, you can always make changes to your loan later on in the process.
  3. Select add-ons. You have the option of adding extra protection to your loan by including a GAP waiver, Powertrain Coverage, and/or Advantage Coverage. Review these options carefully to determine if you would like to add them to your loan.
  4. Find a car. Now the fun part begins. Browse our extensive inventory to find a vehicle that is pre-qualified for the loan you have selected. 
  5. Get your car. Once you find the car of your dreams, download or print your pre-qualification letter. Then, head to the dealership to pick up your car and drive it off of the lot.

That’s all it takes to secure financing for the used car of your dreams. Start the process today by applying for pre-qualification on our website.