When buying a car, you’ll likely be financing it whether you’re buying new or used. The only time you won’t be financing a vehicle is if you have the cash to buy it outright. Most people finance their vehicles, and this leaves them with the question of how long of a loan they should try to get. Two of the most common loan lengths are 60 months and 72 months.
Which of these will be right for you? Before deciding, you’ll need to look at the pros and cons of each and consider your current financial situation.
72-Month Loan: Pros and Cons
Currently, the most common loan term for a vehicle is 72 months, and some choose to take out even longer loans if they’re available. The biggest reason that people opt for these longer loans is that they can help to reduce the monthly payments. You’ll have more time to pay for the vehicle, as well.
With many people choosing to buy more expensive vehicles today, this can be a good way to reduce the monthly expenditure, sometimes by $100 or more. While it’s nice to save some money in the short-term, the drawback is that you’ll end up paying more in interest and finance rates since the loan term is longer.
Often, the interest rate itself will be higher on those longer loans, too. Ultimately, this type of loan will cost you much more than a shorter loan, but sometimes, it may be the only option that you have.
60-Month Loan: Pros and Cons
What about a 60-month loan? Although these are not as popular as they once were, they can still be a good option for many buyers. Of course, they have both pros and cons like 72-month loans.
With a 60-month car loan, you’ll still have more time to pay and lower payments than you would have if you had opted for a short-term loan of 36 or 48 months, for example. While the payments will not be as low as with a 72-month loan, you’ll find that you’re going to be paying substantially less in interest on the loan term.
You won’t find any cons when compared with a 72-month loan other than the fact that your monthly payments will be higher. If you have the money to pay for the loan each month, though, it’s a good idea to choose this rather than the longer loan. You’ll pay the car off sooner and you won’t have to worry about the additional finance charges and interest.
You Could Always Refinance
It’s also important to keep in mind that whether you get a 60-month or a 72-month car loan, you’ll still have the option to refinance down the road. If you find that you can later get better interest rates, it’s generally a good choice to look into refinancing, as it could help you save a lot of money. It may also help to lower your monthly payments.
Your Financial Situation Plays a Role
When you’re getting a loan for a vehicle, your current finances will always play a massive role. Your credit score, for example, will often determine whether you can get a loan, as well as the interest rates on the loan. Better credit means lower interest rates. Sometimes, those who have troubled credit might only be able to get a longer-term loan since it will lower the monthly payments.
The amount of money you can put down on the vehicle and the amount you can comfortably spend each month will also need to be factored into your decision as well. Everyone’s needs and finances are different, so you’ll need to see what options are available for you.
Those who want a vehicle that’s somewhat more expensive and who don’t mind that they’ll be paying more over the course of a loan may want to consider a 72-month loan option. After all, it will help to lower the monthly payments. However, if you can get a 60-month loan, it does tend to be the better overall option.