How Long Can You Finance a Used Car?

There are no set rules for how long you can finance a used car, but there are pros and cons to taking either a shorter-term or longer-term loan.
Written by Jason Tushinski
Reviewed by Carrie Adkins
There’s no hard and fast rule about how long you can finance a used car, but there are pros and cons to taking either a shorter-term or longer-term loan. 
Shorter-term loans have lower interest rates, but higher monthly payments. Likewise, longer-term loans also bring positives, such as lowering your monthly payment, but cons as well, such as paying higher interest rates and the danger of going upside down on your loan. 
No matter whether you choose a short or long-term car loan, you’ll need
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To learn more about whether to take out a short or long-term loan on that used car you now know how best to insure, keep reading!

What’s a loan term?

A loan term is the amount of time you have to pay off your loan.
According to the credit bureau Experian, the average car loan term is between 60 to 72 months. The credit bureau also reports that roughly 60% of car loans are for between 60 to 84 months, which equates to between five and seven years.
A loan term is subjective—it's up to you in terms of how long you want to be paying off a car loan and how much you can afford monthly in servicing that loan.

How long can you finance a used car?

It's up to you and the lender to determine the loan’s terms—how long you want to pay the loan off and how much money you have available to service the loan each month.
Some lenders have limits—for instance, Bank of America won’t finance cars over seven years old or with more than 100,000 miles on them. If your lender has limits that you aren’t comfortable with, keep shopping around for loan terms you can live with.
Above all, talk to your lender about what their limits are—each one is different.
Key Takeaway: Each lender differs in terms of the loan terms they will offer, so be sure to ask.

Pros and cons of longer-term car loans

There are both positives and negatives to stretching your car payments over a longer period of time.

Pros of having a longer-term loan

With a longer loan, you’ll likely have a lower monthly payment. This means you’ll have more money in your pocket in the short term, as you’re paying less each month.
Of course, if you get an income boost, you can ask your lender to adjust your loan payment to pay more per month, and thus pay off your loan sooner.

Cons of having a longer-term loan 

While you’ll pay less per month on a longer loan, the interest rate on such a loan will be higher, so you’ll pay more in interest over the life of the loan.
As well, with a longer loan, you run the danger of paying off a loan for a car that continues to depreciate in value, which can hurt any resale potential. If the car loses so much value that you end up owing more on your loan than the car is worth, this means you’ve gone upside down on your loan. 
Another thing to keep in mind if you’re thinking about a longer-term loan—the longer your loan is, the more chances there are for your finances to take a hit, and thus put your loan payments in jeopardy. 
A job loss, other life expenditures, or even government regulation of the industry you work in, can all have an effect on your income and potentially inhibit your ability to make your monthly payments.
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Pros and cons of shorter-term car loans

Paying a loan off with a shorter term usually means dealing with a lower interest rate and could leave you with decent resale possibilities, but shorter-term loans also saddle you with higher monthly payments and less margin for error.

Pros of having a shorter-term loan

Your interest payments will be lower with a shorter-term loan, so you’ll save money over the life of the loan. But, your monthly payments will be higher, as you have a shorter window of time to pay the loan off.
Ideally, though, you’ll be able to pay off the car faster with a shorter-term loan. If you find yourself in a situation where your credit improves or your income gets a boost, you can ask to refinance your loan and try to take advantage of an even better interest rate, so long as you still have positive equity in the car. 
Of course, even with a shorter-term loan, there is always the danger of going upside down on your loan. However, even if you do go underwater on your shorter-term loan, you’ll have a shorter term on the loan to get through before paying the car off, so hopefully, you won't be saddled for long with an upside-down loan.

Cons of having a shorter-term loan

Right off the bat, you’ll be paying more money per month with a shorter-term loan, which means less money in your pocket on a day-to-day basis. Also, if financial troubles arise, you’ll need to figure out a way to keep paying your loan so you don’t miss a payment and default.  

Paying off your car loan faster

There are things you can do to pay off your loan quickly so you can take advantage of debt-free driving, such as making a bigger down payment and never missing a payment.

Make a bigger down payment

If you can, make a bigger down payment, up to as much as 50% of the value of the car, to reduce your principal, or the amount of the loan you still have to pay off.
The bigger the down payment, the less money you owe, and the smaller the chances of you going upside down on your loan. If you want to make a bigger down payment, try and save up to three months of pay to make a downpayment of a decent size.

Don’t miss a payment

Missing a loan payment can get you in trouble with your lender, as well as damage your credit score.
If you think you will have an issue making a payment, talk to your lender, who may be willing to renegotiate or, in some cases, allow for one or two missing payments—but don’t count on this.

Use a loan calculator

Find a free online loan calculator to figure out exactly how much you can pay each month for a car loan. This will help you make a plan and stick to it to ensure your payments remain on track.

Make a lump-sum payment 

If at all possible, make a lump sum payment and get ahead of your loan schedule. If you can do this, it takes some heat off of you financially and you’ll be able to pay the loan off quicker.

Sell some stuff

If you’ve got lots of stuff you don't need, sell it and use that cash to help pay off your loan faster.

Increase your monthly income

If you find a better job (or a second job) and bring in more money, you’ll be able to pay your car loan off faster and move on with your life!

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Whether a shorter loan term or longer one works best for you, be sure to protect your car with a robust
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