What is the Longest Loan Term on a Used Car?

If you’re planning on financing a used car, it’s important to take the time to find the right used car loan. In fact, experts recommend shopping around for the best deal on a car loan just like you shop around for the best deal on the car itself.

You need to consider a number of factors when choosing the right used car loan, including the loan term. The loan term is the amount of time you are given to pay off your loan. It is typically expressed in months, so you may see loan terms for 24, 36, 48, 60, 72, or 84 months, for example.

Many car buyers search for a used car loan with the longest term possible. But is this a good idea? What is the longest loan term on a used car? What are the pros and cons of choosing a used car loan with a long term? Here’s what you need to know before financing a used car:

What is the Longest Car Loan Term?

Every lender is different, so some auto lenders may offer loans with longer terms than others. In general, though, the longest car loan term is 84 months, which is seven years. 

What Are the Benefits of a Long Car Loan Term?

It’s important to weigh the pros and cons of a long-term car loan before deciding whether it’s right for you. Some of the benefits of choosing a used car loan with a long term include:

• Lower monthly payment. The longer your car loan term, the more time you have to repay the money you borrow. As a result, the amount you are required to pay every month will be lower with a long-term car loan. If you can’t afford a huge monthly payment, you may want to consider choosing a loan with a longer term. 
• Financial flexibility. Keeping your monthly payment low will free up money in your budget. This could give you the flexibility to spend your money on other expenses or even put some aside in a savings account.
• More vehicles in your budget. Because a longer term can lower the monthly payment, you may be able to afford a more expensive car than you originally thought possible. More cars will fall within your budget, which may make it easier to find a car.

These are some of the many reasons why car buyers often opt for used car loans with long terms. 

What Are the Drawbacks of a Long Car Loan Term?

There’s no doubt that there are benefits to a long-term used car loan. However, there are also drawbacks, including:

• Higher total cost. The longer your loan term, the more you will pay in interest over the course of the loan. This means a long-term car loan will have a higher total cost than a similar short-term car loan.
• Higher interest rates. Long-term used car loans are riskier than short-term used car loans. Because there is more risk, lenders typically charge borrowers higher interest rates on long-term used car loans. 
• Greater risk of going underwater on your auto loan. Vehicles depreciate quickly, which means they lose value fast. If you have a long-term loan, your vehicle’s value could eventually fall below the amount you still owe on it. In other words, you will have negative equity, or be underwater, on your auto loan.
• Possibility of your loan lasting longer than your car. There’s no telling how long some used cars will last. If you have a long-term loan, your loan could outlast your vehicle, which means you may be making payments on a vehicle that you can no longer use.
• No long-term flexibility. The longer your loan term, the longer you are stuck with the same vehicle, so you don’t have the same type of flexibility you are given with a short-term loan. 

Keep these drawbacks in mind when deciding whether a long-term used car loan is right for you.

What Other Factors Should You Consider When Comparing Car Loans?

It’s best to request used car loan quotes from multiple lenders before choosing the one that’s right for you. When comparing these car loan quotes, the loan term isn’t the only factor you should consider. You should also consider these factors:

• Annual Percentage Rate (APR): The APR is the annual cost of borrowing money expressed as a percentage of the principal. The APR includes both the interest rate and other fees associated with borrowing money. The higher the APR, the higher the total cost of the loan, so you should look for a loan with the lowest APR possible. 
• Monthly payment: You should never take out a loan that you cannot afford to repay, which is why you should pay close attention to the monthly payment when comparing your options. Make sure you choose a loan with a monthly payment that won’t break your budget. 
• Rules and restrictions: Read the fine print to learn about the rules and restrictions that you must comply with if you take out a loan. Some lenders will only allow you to purchase a vehicle from a specific dealership, for example. If you want the freedom to explore any dealership you choose, you shouldn’t choose a loan with this type of restriction. 

How Old of a Used Car Will a Bank Finance?

It’s important to note that many lenders have rules in place regarding how old of a used car they are willing to finance. This is because the older a car is, the less reliable it becomes, which makes it a riskier transaction for the lender. 

Every lender may have different rules, but in general, lenders will not finance the purchase of a vehicle that is more than 10 years old.

How to Apply for a Car Loan

Now you know the basics about long-term used car loans. If you’re interested in financing a used car, follow these steps to apply for a used car loan from LoanCenter:

1. Get pre-qualified. The first step is getting pre-qualified for a used auto loan, which only takes a few minutes. All you need to do is provide some basic information about your employment and income. You can find out how much you pre-qualify for in a matter of minutes.
2. Customize your loan. The next step is customizing your loan to ensure it is right for you. You can choose the loan term, monthly payment, and other details that best suit your needs. 
3. Choose optional products. You have the option of adding extra protection to your loan in the form of a GAP waiver, Powertrain Coverage, or Advantage Coverage. Adding this extra protection will increase the cost of your loan, but it may pay off in the long run. 
4. Find a vehicle. Once you’re satisfied with your loan, the next step is finding a vehicle. You can browse the inventory of local dealerships directly through the LoanCenter website. 
5. Pick up your vehicle. Print or download your pre-qualification letter once you find the vehicle you would like to purchase. Then, head to the dealership to complete the transaction so you can drive home in your new car. 

You’re just five simple steps away from getting approved for a loan and finding the used car of your dreams. Start the application process today.