So, 60- vs. 72-month car loan—which is better?
Unfortunately, with both loan terms, you’re at a much higher risk of going “upside down,” which means owing more than the car is worth over the life of the loan due to depreciation. But, if you are someone who likes to hold onto your car for a long time, this may not be an issue. Overall, if you’re choosing between the two, a 60-month loan is better because you’ll pay off the loan faster with a lower interest rate, and you’d be paying less overall for your car.
If you’d like to make more auto loan comparisons, this article on common car loan terms can help.
Is a 72-month car loan worth it?
Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn’t an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go. You can learn more about car loans here.
Tips on taking a detour from a longer car loan term:
- Shop around. Many experts agree that it’s best to do some research before autographing auto loan forms. It also helps to get pre-approved beforehand so that you have a better idea of the loan amount you qualify for and monthly payment amounts. It’s also a good idea to look for a loan with a low APR to help lower interest payments.
- Refinance your long-term loan.If you’ve already pulled the trigger on a long-term loan, know that there’s still hope. You can look into refinancing your ride, and with good credit, you’re more likely to get a better interest rate. Our auto loan refinance calculator can help you decide if refinancing makes sense for your situation.
- Make a larger down payment. It’s a good idea to save at least 10% for a down payment for a used car and 20% for a new car. If you’re not sure if it’sbetter to get a new or used car, you may find this article to be helpful.
Note:If you absolutely cannot swing a shorter-term loan, and you’re in dire need of transportation, it’s okay to get a long-term loan to free up more cash every month for other necessities. However, it’s a good idea to put down more money on your monthly payments than agreed upon when you can. Just be sure that the additional amount goes towards the principal balance of your loan and that there aren’t any pre-payment or pre-payoff penalties.
What credit score do you need to get an auto loan?
Fun fact, it’s a myth that people have just one credit score. The truth is that you have many credit scores! One of the most common scoring models is FICO®, which offers a FICO® Auto Score that weighs many different factors into account—with credit utilization having the most impact.
How FICO® categorizes credit scores:
- Exceptional: 800-850
- Very Good: 740-799
- Good: 670-739
- Fair: 580-669
- Poor: 300 to 579
However, it’s important to note that not every lender uses the same scoring model for credit scores, and they have their own categorization methods. Typically, borrowers need at least a 661 to qualify for an auto loan. Keep in mind that lenders will also weigh income heavily into account when reviewing applications. The better your credit scores and income, the better your interest rate will be. If you’re looking for ways to improve your scores, this guide provides some helpful tips on how to do so.
Pssssst, just remember that applying for a car loan can typically involves a “hard” credit inquiry. This means that with a formal application, lenders reach out to the credit bureaus to get your score. Too many hard hits will raise a red flag for credit bureaus, which can lower your score. Typically, you can apply for a handful of places within a two-week timeframe before it does any damage to your credit.
What is a good interest rate for an auto loan?
Interest rates will vary based on credit score, term, location, income, debt, loan amount, and type of car you’re buying, to name a few. But, knowing the average auto loan rates can help give you a better idea of what to look for when shopping.
The average interest rate is 4.05% for new cars and 7.98% for used cars for borrowers with credit scores in the range of 661-780. Here are some helpful tips on applying for a used car loan.
FAQs
Is a 72-month car loan worth it? Because of the high interest rates and risk of going upside down, most experts agree that a 72-month loan isn't an ideal choice. Experts recommend that borrowers take out a shorter loan. And for an optimal interest rate, a loan term fewer than 60 months is a better way to go.
Which credit union has the best auto loan rates? ›
Compare Car Loan Rates
| Top Auto Loan Lender | Lowest APR | Our Award |
|---|
| PenFed Credit Union | 5.24% | Best Credit Union Auto Loan |
| Auto Approve | 5.24%** | Best Auto Refinance Rates |
| Consumers Credit Union | 6.54% | Excellent Credit Union Auto Loan |
| Auto Credit Express | Varies | Best Auto Loan for Bad Credit |
2 more rowsAn interest rate under 5% is a great rate for a 72-month auto loan. However, the best loan offers are only available to borrowers who have the best credit scores and payment histories.
What is the best duration for auto loan? ›
NerdWallet typically recommends keeping auto loans to no more than 60 months for new cars and 36 months for used cars — although that can be a challenge for some people in today's market with high car prices. Ultimately, choosing the best auto loan term depends on balancing cost, affordability and your specific needs.
Is 60 months too long for a car payment? ›
NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months. These maximums can help you avoid some of the negative outcomes of long-term loans.
Will a bank finance a car for 72 months? ›
You pay the money back over a fixed period of time and pay interest on the amount you borrowed. Lenders typically provide loans that range from 36 to 72 months, but longer and shorter loan terms are available.
Do credit unions have higher loan rates? ›
On average, credit unions offer higher saving rates and lower loan rates. This could help group your savings grow faster and your loan will cost less. Credit unions also tend to charge lower fees, require lower deposit balances and offer better service.
What FICO score do credit unions use for auto loans? ›
What credit score do auto lenders look at? The three major credit bureaus are Experian, TransUnion and Equifax. The two big credit scoring models used by auto lenders are FICO® Auto Score and Vantage.
What interest rate can I get with a 750 credit score for a car? ›
Average Auto Loan Rates in March 2024
| Credit Score | New Car Loan | Refinance Car Loan |
|---|
| 750 or higher | 12.77% | 7.89% |
| 700-749 | 12.65% | 8.98% |
| 600-699 | 17.84% | 10.09% |
| 451-599 | 22.56% | 12.76% |
1 more rowAverage Car Loan Interest Rates by Credit Score
| Credit Score Range | New Car Loan Rates | Used Car Loan Rates |
|---|
| 781 to 850 | 5.64% | 7.66% |
| 661 to 780 | 7.01% | 9.73% |
| 601 to 660 | 9.60% | 14.12% |
| 501 to 600 | 12.28% | 18.89% |
1 more rowThe lowest auto loan rate in 2023 was 6.15 percent for a four-year used car loan in mid-January. Bankrate's expert predicts five-year new car loan rates will reach an average of 7.0 percent and four-year used car loans, 7.5 percent by the end of 2024.
What is a bad APR for a car? ›
People with excellent credit qualified for rates around 5.64 percent, while people with bad credit had an average new car rate of 14.78 percent. Rates for used cars were higher — 11.93 percent across credit scores. And the average rate for bad credit was a sky-high 21.55 percent.
What is the car payment on a $30,000 car? ›
A $30,000 auto loan balance with an average interest rate of 5.0% paid over a 6 year term will have a monthly payment of $483. In total, the loan will cost $34,787 with $4,787 in interest.
Is 60 month financing a good idea? ›
Higher interest rates are another reason to stick with a 60-month loan. The longer the term, the more interest you will pay on the loan, both in terms of the rate itself and the finance charges over time.
Is a 5 year car loan too long? ›
You can finance your car for as little as a few months to more than 84 months—or seven years. The most common length is 72 months—or six years—followed by 84 months. The longer your loan term, the lower your monthly payments, but the higher the overall interest.
Is it better to finance a car long term or short term? ›
A longer loan term means you'll get a lower monthly payment, but you'll also pay more in interest. A shorter loan term is better, as it helps minimize borrowing costs and the risk of being upside-down on your loan.
What are the pros of taking a longer period car loan? ›
Beyond minimized payments, consumers can reap other benefits of long-term auto financing. Lower down payment – For those who would rather not pay a larger down payment, but have no problem making a monthly payment, purchasing a vehicle with long-term financing could mean a lower down payment requirement.
Is it better to buy a car full or monthly? ›
Traditional auto-buying wisdom says to focus on a total price first rather than a monthly payment because a monthly payment can become problematic if the dealer learns your budget. For example, if you want to keep your new car payment to $400 per month, the dealer might easily get your payments within your budget.
What is the rule of the 72 car loan? ›
Just divide 72 by your interest rate, and there you have how long it would take for the loan or investment amount to double. So, 1% would take 72 years to double. 5% takes about 15 years to double. 10% takes 7.2 years to double.
