Key Takeaways
- More than one in five car loans now run seven years or longer.
- Longer loan terms may reduce monthly payments, but they also increase the total cost and the risk.
- If you can’t pay off your car loan within five years, you may want to consider a cheaper model, a used car, or a larger down payment.
More Car Buyers Are Choosing Longer Auto Loans
Rising car prices, interest rates, and affordability pressures are pushing more buyers toward longer auto loans. Experts often recommend not stretching payments beyond five years, yet nowadays it’s common for people to still be paying off their car seven years later.
According to Edmunds, more than one in five car loans now stretch to a record seven years or longer. Average loan terms have also been creeping up, reaching 69.6 months for new cars and 70.1 months for used cars in the fourth quarter of 2025.
Experian, another trusted source of auto-industry data, has made similar observations. In the third quarter of 2025, of the new-vehicle buyers who financed their purchases with a loan, nearly 70% financed with a loan of more than five years. Some even opted for loan terms of up to seven years or more.
Auto Loan Terms Keep Getting Longer.
Ten years ago, new-car loans averaged 67.8 months and used-car loans averaged 66.5 months. Today, both are closer to 70 months, underscoring a long-running shift toward longer auto loans.
While lower monthly payments can make your dream car seem affordable, over the long run, you’ll end up paying more interest and exposing yourself to greater financial risks.
How Stretching an Auto Loan Raises the Cost of a Car
Most people rely on financing to buy a car, and discussion at the dealership typically revolves around keeping the monthly payment as low as possible. Longer loans are often attractive because they can significantly reduce that monthly payment.
But there’s a major trade-off: The longer you borrow, the more the car ultimately costs, because you’ll be paying interest for a longer period.
Imagine you wanted to buy a new car for $50,000, which is roughly the average amount they cost these days. Here’s how the numbers would look with a five-year versus a seven-year loan, assuming a down payment of $5,000 and the interest rate on the $45,000 borrowed being fixed at 7%.
| 5-Year vs. 7-Year Auto Loan with a 7% Interest Rate | ||
|---|---|---|
| Five-year loan | Seven-year loan | |
| Monthly payment | $891.05 | $679.17 |
| Interest paid | $8,463.24 | $12,050.33 |
| Total cost | $58,463.24 | $62,050.33 |
As you can see, opting for the seven-year loan saves you roughly $212 per month but also increases the cost of the car by nearly $3,600.
Interest rates on car loans are often partly determined by credit scores, so borrowers with poor or limited borrowing histories may face even higher costs. Longer auto loans also increase the likelihood of owing more than the car is worth. Being “underwater” can trap buyers in debt, make it difficult to sell or trade in a vehicle without paying out of pocket, and lead to losses if the car is totaled or stolen.
What Car Buyers Should Consider Before Taking a Longer Loan
Longer loans increase the total price of a car and the risk of it one day being worth less than you still owe. These situations can drag down your finances.
Before committing, it’s worth calculating how much more the car would cost overall by stretching the loan term, considering how long you plan to keep it, and asking whether you could still handle the payment if your financial situation changed. With longer loans, the monthly bill is lower, but the obligation lasts longer.
If the only way to afford the car or to qualify for financing is to stretch the loan term, that might be a sign it’s out of your budget. If you can’t keep the payments within five years, you may want to consider buying a less expensive model, opting for a used car, or saving to make a larger down payment and reduce the amount you borrow.
Longer loans can make buying a fancier car viable and immediately affordable, but they come at the expense of higher total costs and less flexibility later. For many buyers, the safer move isn’t stretching the loan but lowering budgets or footing more of the cost up front.
