72 Month Car Loans: What They Are and Why To Avoid Them

72 months is equal to 6 years—that’s a long time to be stuck with a payment and interest rate that’s higher than the average.
Written by Jacoba Bood
Reviewed by Kathleen Flear
background
You can take out a 72 month
car loan
, but it’s best to avoid loans over 60 months whenever possible. 72 month loans often come with high interest rates that can leave you owing more than your car is worth.
  • 72-month or 6-year car loans often come with high interest rates, making it best to avoid them in favor of shorter, more cost-effective 60-month or shorter term loans.
  • Choosing a 72-month car loan could leave you upside down with negative equity, plus the overall cost of car financing will be much higher.
  • To save money on the total cost of financing without opting for a long-term loan, look for lower APRs, consider refinancing and lease options, and make a substantial down payment.

Four reasons to avoid 72 month loans

The low monthly payments that often come with 72 month auto loans might seem appealing, but it’s always best to avoid car loans over 60 months if you can afford it. Here’s why:

1. Ending up upside down

When you take out a 72 month loan or longer, you’re highly likely to end up
upside down on your loan
. You are considered upside down (or underwater) when you owe more than your car is worth.
Since depreciation happens quickly on new cars, it’s not uncommon for borrowers even with the best auto loan rates to spend some time underwater—especially in the first two years. But with a longer loan term, you’re far more likely to stay upside down longer.
The bottom line: It’s best to avoid being upside down in a loan whenever possible. Being upside down on a loan can make it difficult for you to sell your car or refinance it.

2. Stuck with negative equity

If you end up having to trade-in the car before the loan balance is paid off, you might have to deal with
negative equity
during your new car purchase. In short, the amount you still owe on the vehicle gets tacked onto the new car loan.
You could also end up owing your lender money if your vehicle is totaled.
Let’s look at a quick example: If you total your car worth $15,000, but you owe $18,000 on your car loan, you’ll still owe $3,000 to your lender after your insurance provider pays out your claim. That means you’ll be making loan payments on a car you no longer have.
A regular insurance policy won't cover you for what's on the car loan—just the value of the car. Negative equity can quickly spiral out of control if you take out a new loan with the negative equity added on top.
If you do end up upside down on your loan, a
gap insurance
policy can help make up the difference. If your car is totaled and you have gap coverage, your insurance company will pay your lender for any negative equity you owe on your car loan up to your policy limit.

3. Interest rates increase

Most 72 month loans come with higher interest rates than 60-month loans, or those with even shorter terms. And this is already on top of the longer loan term. 
Not only will it take longer to pay your car off, but the higher
annual percentage rate
(APR) means you’ll wind up paying more in interest over the life of the loan on the same loan amount.
MORE: How to calculate total interest paid on a car loan

4. Potential car repairs

Once your warranty coverage expires, you could end up shelling out for repairs in addition to having to keep up with your payments. 
A 72-month-old car is hardly new anymore. By the time your loan is paid off, you might already be paying for
car repairs
out of pocket.
Key Takeaway The downsides of a 72 month car loan can easily outweigh an appealing monthly payment schedule.

Alternatives to getting a 72 month loan

Even if you’re on a tight budget, it’s possible to avoid the less-than-favorable terms that come with 72 month car loans. Here are some alternative solutions to traditional 72 month loans.

Choose a low APR loan

The lower the APR that you can get on your loan, the better. A lower interest rate may not make a big dent in your monthly payments, but it can save you big money in the long run.
Generally speaking, longer-term loans typically come with higher APRs—but this may not always be the case. Even if you can’t afford a shorter loan term, opting for the loan with the lowest interest rate will help you avoid ending up upside down on your loan.
MORE: What is APR and how is it calculated?

Consider refinancing your loan

If you do agree to a 72 month loan, you might be able to refinance it for better loan terms later down the line if you have a good credit score. When you refinance a car, a lender will pay off your old loan and give you a new loan under new terms.
It will be easier to refinance your loan for more favorable terms if you have good credit. If you have bad credit, you might not get a better deal on your new loan and could end up paying extra fees to refinance.
MORE: What is a good credit score for a car loan?

Consider alternative auto financing

Getting a loan through the dealership is simple, but banks and especially credit unions often have better car loan interest rates. Plus, credit unions are more likely to offer affordable financing for used car loans.
Be sure to shop around for a few offers before settling on a lender.

Lease instead of buy

If you want to get behind the wheel of a car that is a stretch to afford, you might want to
lease rather than buy
. Leases almost always have lower monthly payments than loans, so leasing can be a good short-term option if you’re low on cash.
A car lease is basically an extended rental contract. While you won’t own the car when the lease is finished, you will have the option to buy it after.

Put down a big down payment

If you need to take out a longer-term loan on a new vehicle, aim to put down at least 20% for your
down payment
. Not only will this help to lower your interest rate, but it can also result in a lower monthly car payment.
Saving up might seem like a pain, but if you put down a large enough down payment, you’re less likely to end up upside down on your loan. Likewise, the more favorable your loan term, the more value you will get out of your down payment.
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FAQ

Generally, yes, a 72 month car loan is bad. When you get a 72 month car loan, you're more likely to go upside down on your car loan, which leaves you in a vulnerable financial position.
72 months is the same as 6 years. If you opt for a 72 month car loan, you will have to make regular payments for the next six years, with higher interest rates than a shorter loan.
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