Is Going Long Term the Best Car Loan Possible?

To many among the car buying public, the best car loan going today is a deal that will take a full 84 months to pay off. About one in six car loans today are for terms that touch on seven years. There are a number of ways in which to interpret this.

If you keep a car loan for this long, it might outlive your actual marriage. The U.S. Census says that the typical divorce occurs seven years into the marriage. Many people don't even keep their cars that long. But jokes apart,  if you're looking for the best car loan deal possible, should you even consider a seven-year loan?

Traditionally, the simple answer would have been to say no. Very long term car loans, like long-term mortgages, have traditionally been more expensive. Lenders would easily charge 2% more for car loans that lasted that long. But perhaps in response to the way the economy has been slow and Federal Reserve has cut  rates for mortgages, and ultra-long-term car loans have become cheaper.

These loans used to cost you 5%, before the recession struck. These days, 2% is more like it; on some models of cars, you can actually get your loan at 0%.

For a couple of years after the recession struck in 2007, many lenders
felt that things were to inert for them to be able to trust anyone for longer than five years. The restrictions of the East and the car lending sector. They don't feel much more comfortable doing this.

The question remains though – is this the best car loan officer for the average car buyer. The main appeal in such long-term car loans is usually that since your loan repayment is spread over a long period, you get to pay very reasonable installments each month. The downside of course, is that you've hung on to the lender's money for longer, and that –results in more money paid and interest. Typically, you'll end up paying about $2000 more for a car finance for 7 years than your would if you car had the standard four-year loan.

This might work for some people; it wouldn't for everyone. It really depends on your circumstances.  if you feel that money is really tight and you have to have a specific part, this would be a good idea. But if things are that's tight, you really should consider buying a used car instead. A couple of thousand dollars saved isn't anything to turn your nose up at.