A range of factors determine the length of term for a car loan. The car buyer has a lot of influence on the length of the loan term. The vehicle manufacturer, type of vehicle and the chosen lender all affect the number of payments for a particular loan.
Typical Loan Terms
Auto loan lenders provide rates for loans of 2, 3, 4, 5 and possibly 6 years. These loan terms equate to 24, 36, 48, 60 and 72 payments, respectively. As the term of the loan gets longer, the interest rate will increase. The five-year/60-month car loan is traditionally the longest available car loan, but some lenders or captive finance companies will provide the longer 6-year auto loans to make payments more attractive on more expensive cars.
New Car Loans
New car loans will be available with terms of at least 60 months and probably 72 months. Term limits are set by the lender based on the type and price of a car. Incentive rate loans from the car manufacturers will often promote lower rates for shorter terms. For example, a car manufacturer may offer zero percent loans with a 36-month term. A longer-term loan will have a higher rate such as 2.9 percent for 48 months and 3.9 percent for 60 months. Six-year loans will have a significantly higher interest rate than five-year car loans.
Used Car Loans
Used car loans will be term-limited based on the age of the used car. A lender may not want to accept a five-year loan on a 6- or 7-year-old car but will be happy to take a longer-term loan on a 1-year-old used car. Each lender will set term limits based on the age of a used car. The interest rates for used cars may also increase as the model year gets older.
Car Financing Considerations
A car buyer has the option to choose the term of the car loan. The dealer will almost always quote payments at a 60-month or longer term on new cars to make the payment as low as possible. Shorter-term loans will have higher payments, but possibly a lower rate and pay down the loan quicker. It is possible to get a loan for any term less than the maximum such as 42 or 54 months. Used car buyers should look for late model used cars for longer loan terms and lower rates.
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