How many years should you finance a new or used car?

Deciding which car model or make you should buy may not be the biggest decision you face when you step foot into a dealership. Instead, the bigger question at hand may be just how long you should finance a new or used car for.

Depending on multiple factors, such as credit score, some consumers may qualify for financing of 84 months – an eight-year term – or more. The average loan term at the start of 2021 was 69 months for new and nearly 66 months for used vehicles, according to Experian data.

Short vs. long-term car loans

There are several things you should keep in mind when considering how many months you should finance your vehicle for. Increasing the car loan term is an effective way of getting an affordable monthly payment. While a low payment is always appealing, a longer car loan period typically comes with higher interest costs.

Consider someone who takes out a loan for $29,039 – the average amount for a new SUV says Experian – over 60 months with a four percent interest rate. Their monthly payment is $534.80 and they pay $3,048.84 in interest by the end of the contract. Extend the loan to 84 months and the car payment falls to $396.93, but the total interest charge is $4,302.99; an extra $1,254.15.

There’s also the increased risk of negative equity, when you owe more than the vehicle is worth. With a lengthy loan, for example, you might still be making payments on an older, high-mileage vehicle that’s fallen greatly in value. Taking into account the average length of new vehicle ownership is nearly seven years, you could find yourself changing cars without enjoying the benefits of debt-free driving, or face trading in while upside down.

Long-term auto loans are suitable for some buyers, though, and could be the best option to get on the road in a much-needed vehicle. When it comes to your own financing needs, use Chrysler Capital’s auto loan calculator to estimate what length of loan may work, and how much you might be able to borrow for a car in total. Adjust the loan duration, interest rate and monthly payment to see how the suggested financing changes.

How Much Car Can I Afford?

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Get a quick loan decision

When you’re ready to apply for a new or used vehicle loan, complete our short online application, and get a decision in seconds. We accept applications from consumers with a broad range of credit, including bad credit,* and offer qualified applicants auto loans up to 84 months.

* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press),,, Investopedia, and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by Chrysler Capital.