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What should the duration of the duration of your vehicle loan be? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive tools and financial calculators, publishing original and objective content. We also allow you to conduct your own research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies that pay us. This compensation can affect the way and where products appear on the site, such as, for example, the sequence in which they appear in the listing categories and other categories, unless prohibited by law for our loan products, such as mortgages and home equity, and other products for home loans. But this compensation does have no impact on the information we provide, or the reviews you see on this site. We do not cover the universe of companies or financial deals that may be open to you.



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4 minutes read. Published August 19, 2022
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This article was written using automation technology and thoroughly edited and fact-checked by an editor from our editorial team.







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to manage their finances by providing clear, well-researched information that is broken down into complex subjects into digestible pieces.







Reviewed by Mark Kantrowtziz Reviewed by Nationally acknowledged student financial aid expert

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









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Choosing the length of the financing for your car is the most important thing to consider in deciding on the right auto loan. A longer loan term will lower the monthly payments however you'll be paying more interest over the life of the loan. A shorter loan term means that you'll be paying less interest overall however, your monthly payments will be more expensive. How do you determine the appropriate duration of the loan? When you are deciding on your car loan be sure to consider your loan term with respect to the value of the car and the financial circumstances of your. A longer loan duration will lower your monthly cost but may not be the most suitable option if you can afford a higher loan cost or prefer having a cheaper car. Bankrate tip: It is crucial to think about your budget as well as the purchase and upkeep -- before purchasing the car. Apply for an auto loan through your bank or credit union ahead of shopping for a car. To determine the best time frame for your loan, follow these steps: Determine your budget. This should be your monthly budget, and the amount you'd like to pay for the car the car. Be aware of how your finances is likely to change and take that into consideration. Make sure you are prequalified with three lenders. A little research can help you qualify for the lowest interest rate. The local credit union may allow you better payments, especially when you already have a relationship with them. Check the total amount of interest. Use your prequalification data and then plug them into the calculator to determine the amount you'll pay each month, and the amount of interest you would be paying in total. Make a decision. Consider both the monthly payment and the overall cost when deciding which loan timeframe is most suitable to your requirements. Short-term and long-term auto loans While a long loan can allow you to buy a more expensive vehicle, it does mean greater interest over a longer period. So even although the monthly installment is lower but the total price will be higher. An auto loan, on the other side, has lower interest however a greater cost per month. In the event that your financial plan doesn't seem spot right, or there's a sudden shift of your earnings, then you could find yourself struggling with the monthly payments. There is no perfect loan length that is suitable for all drivers, take into consideration the advantages and drawbacks of each before you sign off on the next car. The advantages and disadvantages of a long-term automobile loan A is a good option if your budget isn't able to afford a larger monthly payment. Because your monthly payments will be lower, it might also help you afford the cost of a more expensive vehicle. However, with a longer auto loan, you will pay more interest overall. A longer-term loan also increases the risk of getting yourself into a loan or owing more than the vehicle is worth. This could make trading in or selling the vehicle more difficult. Advantages and disadvantages of an auto loan with a short term loan Where long-term auto loans can result in an excessive quantity of fees, a shorter term implies less interest overall. It also means that your vehicle will be available even sooner. Along with this, newer at a fast rate in the first five years, so it's unlikely that you'll be able to pay more than what your vehicle is worth over a long time. If your budget is in a pinch taking out an immediate loan is a riskier choice. This is particularly true if you don't have a substantial . To avoid this, stay away from costly cars that may strain your budget. There are many reasons to think about a less loan duration There are a few reasons to sign off on a shorter loan. You'll pay off your loan faster, which means that you can take full advantage of the car you've purchased and will not be left with a large loan due to. Be aware of these important factors when you decide on the duration of your loan. Fewer years to pay A longer loan term could mean making payments for five to seven years. A shorter, two- to four-year period will place you in the full ownership of your car much sooner and you'll receive the money back in your monthly budget and can use it to pay down high-interest debts or to save. Less likely to be upside-down with your loan If you need to sell or upgrade your vehicle and you're in need of a new car, you'll have more flexibility to make the switch. You likely won't have a higher balance than your car is worth which makes it much easy to sell it to get another vehicle. A higher resale value the lower risk of getting in a position of being upside down on your loan, paying off your car sooner means that it'll be worth more when you're done paying it off. That means if your situation alters and you're forced to upgrade -- or you just need a new car you'll be able to obtain more value for your car than if you had to wait five to seven years. It's crucial to consider what kind of car you could truly afford. Outside of the overall price of the loan think about how much you can pay into your car every month, including fuel and insurance. A shorter-term loan may not be the ideal alternative for you to buy the vehicle you've always wanted. But if a similar model is less expensive and can stop you from getting an extended-term loan, it may be worth the compromise. If you decide to go with the shorter or longer term ensure that you obtain the best price possible. Find out more


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Written by

This article was written by using automated technology. It was then thoroughly edited and fact-checked by an editor on our editorial team.



The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are enthusiastic about helping readers gain the confidence to manage their finances through providing clear, well-researched information that break down complex topics into manageable bites.






Auto loans editor


Reviewed by Mark Kantrowtziz Reviewed by Nationally acknowledged student financial aid expert

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






Nationally acknowledged expert in student financial aid




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