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What should the duration of your car loan be? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators that provide objective and original content. This allows you to conduct research and compare information for free to help you make financial decisions with confidence. Bankrate has agreements with issuers including, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this site come from companies that compensate us. This compensation could affect how and where products appear on the site, such as, for example, the order in which they may appear in the listing categories in the event that they are not permitted by law for our mortgage, home equity, and other products for home loans. But this compensation does not influence the information we provide, or the reviews you read on this site. We do not contain the entire universe of businesses or financial offers that may be open to you.



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4 min read Published 19 August 2022
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At Bankrate We take the accuracy of our content very seriously. "Expert verified" signifies we have the Bankrate Financial Review Board thoroughly evaluated the content for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is impartial and balanced. Their reviews make us accountable for releasing quality and reliable content.




Written by Bankrate Written by

This article was written with the help of automation technology, and then edited and fact-checked by an editor on our editorial staff.







Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to manage their finances through providing clear, well-researched information that is broken down into complicated topics into bite-sized pieces.







Review by Mark Kantrowtziz. Reviewed by Nationally known student financial aid expert

Mark Kantrowitz is an expert on student financial aid, the FAFSA and 529 plans, scholarships as well as tax benefits for education and student loans.









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The length of your vehicle's financing is an important factor when it comes to picking the ideal auto loan. A longer loan period will reduce the monthly payment however you'll pay more in interest over the course that of the loan. A shorter loan term means that you'll pay less overall interest, but your monthly payments will be higher. How do you determine the appropriate term length When selecting your car loan, consider the length of the loan period in relation to the cost of the car and your financial situation. A longer loan duration will lower your amount of your monthly payments but may not be the best solution when you are able to manage a larger loan cost or prefer a less expensive vehicle. Bankrate's advice: It's important to consider your budget as well as both the transaction and the maintenance costs before you purchase the car. Consider a car loan from your credit union or bank prior to shopping for a car. To find the right duration for your car loan Follow these steps: Establish your budget. This should be your monthly budget and the amount you'd like to spend on the car it self. Consider how your finances will change, and take that into consideration. Be sure to qualify with at least three lenders. Shopping around can help you qualify for the lowest interest rate. The local credit union may allow you better payments, especially if you have an existing relationship with them. Compare the total interest. Use your prequalification data and then plug them into the calculator to determine the amount you'll pay per month and how much interest you'd pay in the long run. Make a decision. Consider both the monthly payment as well as the total price when deciding which loan timeframe is most suitable to your requirements. The long-term loan is more expensive than the short-term loans Although a longer loan gives you the chance to purchase a more costly vehicle, it does mean higher interest rates over a longer period. So even although the monthly installment will be less, the overall cost will be more expensive. An auto loan however, on the other side, has less interest paid and a more expensive cost per month. When your spending plan isn't in the right place, or if there's a sudden change in your income, you might end up struggling with those payments. There's no ideal loan length that is suitable for all drivers, so consider the benefits and disadvantages of each prior to signing off on your next vehicle. The advantages and disadvantages of the long-term automobile loan A is a good option for those who's budget can't pay for a greater monthly installment. Since your monthly payment will be less and it could make it easier to afford a higher-priced vehicle. However, with a longer auto loan you'll pay higher interest in the long run. A longer-term loan can also increase the chance of finding yourself on your loan or having to pay more than the car is worth. This scenario can make trading in or selling the vehicle more difficult. Benefits and drawbacks of a short-term auto loan Where longer-term auto loans can mean an excessive quantity of fees, a shorter term means less interest paid overall. Also, your car will be fully yours much faster. Along with this, newer vehicles are sold at a faster rate over the first five years, so it's highly unlikely that you'll end up owing more than the car is worth for an extended time. If you're on a tight budget and you're not sure if you can afford a short-term loan is a riskier choice. This is especially true when you don't have a sizable . To prevent this from happening, stay clear of expensive vehicles that may strain your budget. Reasons to consider a shorter loan period There are many reasons to sign off on a shorter loan. You will have to pay off your loan faster, which means that you can take full advantage of the vehicle you've bought and won't be left with a large loan due to. Be aware of these important aspects when deciding on the length of your loan. Lower payments over time A longer loan period could mean payments over five to seven years. A shorter, two- to four-year period will place you in full possession of your car much sooner, which means you'll get the cash back into your monthly budget , and you can use it to pay down high-interest debts or to save. Less likely to be upside-down on your loan If you have to sell or upgrade your vehicle then you'll have the flexibility to make the necessary changes. It is likely that you won't have more than what your car is worth which makes it much easy to sell it when you're ready for a different ride. Better resale value Similar to having a lower chance of being over-paying on your loan getting your car paid off earlier means it will be worth more once you've finished making payments. This means that if your circumstance alters and you're forced to upgrade -or just desire a change -- you'll receive more as opposed to having to wait five or seven years. The main thing is to think about how much car you can actually afford. Outside of the overall price of the loan take into consideration how much you can pay towards your car each month, including fuel and insurance. A shorter-term loan may not be the best alternative for you to buy the vehicle of your dreams. If a comparable car is less expensive and can stop you from getting a longer-term loan and it is worth the sacrifice. Whether you opt for either a shorter or longer-term ensure that you get the best deal possible. Find out more


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Written by

This article was written using automation technology and thoroughly checked for accuracy and editing by an editor from our editorial staff.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate from late 2021. They are enthusiastic about helping readers gain confidence to take control of their finances through providing concise, well-researched and well-researched content that break down complex subjects into bite-sized pieces.






Auto loans editor


Review by Mark Kantrowtziz. Reviewed by Nationally recognized expert on student financial aid

Mark Kantrowitz is an expert on student financial aid, including the FAFSA and scholarships, 529 plans as well as tax benefits for education and student loans.






Nationally recognized student financial aid expert




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