Find the Right Auto Loan Term Length for Your Budget
How to Choose Loan Term Length
When purchasing a new vehicle, deciding which term length you will choose to pay off your loan is an important consideration. Longer terms may offer lower monthly payments, which can be attractive but will result in higher interest over the life of your loan. Shorter terms offer lower interest overall, but the higher monthly payments could be harder to manage within particular budgets. Also, don't forget to factor in additional expenses like auto insurance, gas, and maintenance that will need to be included in your monthly budget.
Using our Calculator to Compare Monthly Payments by Term
You will need the following information:
- Vehicle Purchase Price
- Cash Rebate or Cash Back
- State Sales Tax
- Trade-In Value
- Amount Owed on Trade-In
- Interest Rate
- Down Payment Amount
Auto Loan Term Lengths
Auto loan term lengths can range from 12 to 72 months—or even longer, depending on your lender. The following are the most common auto-term lengths with brief explanations to help determine the pros and cons of each:
- 12 Months: Higher monthly payments with less interest overall.
- 24 Months: Lower payments than 12 months, but increased interest.
- 36 Months: A balanced term length with moderate payments and interest.
- 48 Months: Lower monthly payments with more interest over time.
- 60 Months: Lowest monthly payments but the highest interest.
Additional Expenses That Influence Your Monthly Auto Payment
Your monthly auto payment is only one part of what you will pay each month for your vehicle. Consider the following additional items that will impact the total cost of vehicle ownership per month and be sure to factor them into your budget:
- Insurance: Comprehensive, collision, or liability insurance is typically required by state law and can significantly increase monthly costs, depending on the type of vehicle purchased, where you live, and your driving record.
- Maintenance: Regular maintenance, like oil changes and tire rotations, can help avoid costly repairs down the road.
- Gas: Fuel costs are impacted over time by various global and economic influences, so choosing a car with a reputation for good gas mileage and efficient fuel consumption is wise.