Should you ever consider an 84-month auto loan?


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The terms of car loans are getting longer, and today there’s nothing shocking about an 84-month auto loan, which stretches payments out over seven years. In 2014, 62 percent of all car loans were for terms longer than 60 months, and nearly 23 percent were for 73- to 84-month terms.

Compare these figures to when auto industry titan Lee Iacocca was a regional manager for Ford in the 1950s. Industry lore has it that he became a star by inventing an unheard-of sales pitch: Car buyers could purchase a 1956 Ford for 20 percent down and $56 a month. Loans were paid in full in 36 months.

How times have changed. Now, car loans of at least five years are not uncommon, and while long terms have advantages for certain buyers, they are not free of some big disadvantages.

How car loan term affects cost
Loan amount Rate Length of loan Total amount paid at end of loan
$35,000 5% 60 months $39,630
$35,000 5% 84 months $41,554


Benefits of 84-month auto loans

  • Qualification. The primary thing a lender looks for when determining whether to approve a loan is the risk level associated with the applicant. With an 84-month loan, your monthly payments will be lower relative to your income. The lower debt-to-income ratio may make it easier to qualify for the loan.
  • Monthly payments. Simply put, you can borrow more money at a lower monthly payment with an extended repayment plan.
  • Cheap money. When interest rates are low, it can make sense to borrow money for as long as possible, using the money you save with lower payments to pay off higher-interest debt.
  • Lower delinquency rate. Borrowers with credit scores of 641 to 680 who had auto loans of 84 months or longer had a lower average 30-day delinquency rate than others with similar credit scores.

Downside of 84-month loans

  • Greater cost over time. The math bears out the fact that the total cost of an 84-month loan is higher than a 60-month loan. Assuming an interest rate of 5 percent, the total cost for a $35,000 car loan over 60 months is $39,630, but at 84 months the same loan will cost $41,554.
  • Depreciation. According to Edmunds, a new car depreciates by more than 9 percent the moment it’s driven off the lot. One year later, that new car is worth nearly 20 percent less than what you paid for it, and at the end of 60 months it could very well be worth 63 percent less. The fact is, few cars hold their value for 84 months.
  • Repair issues. The older the car, the more costly the repairs. Even if you can find someone willing to offer an 84-month warranty on your automobile, it is likely to be expensive. Without one, you pretty much guarantee yourself hefty repair bills.

Use Bankrate’s auto loan calculator to figure out the monthly payments on your next new or used car.