man smiling looking inside a new car he wants to purchase with a 72-month auto loan

The length of your auto loan term can vary greatly from 36 months to 84 months or longer. The popularity of longer auto loan terms, like the 72-month auto loan, is growing and for good reason. Longer loan terms allow you to pay less each month which gives you more flexibility in your budget and the ability to purchase a better quality vehicle.

The Average Auto Loan Term

According to the Experian State of the Automotive Finance Market Report, Q3 (October-December) of 2019 saw an increase in loan terms over 60 months.

Here’s the breakdown for both new auto loans and used auto loans.

New Auto Loan Terms

Loan Term
Percentage of Loans
49-60 months
20.1%
61-72 months
41%
73-84 months
30.9%
85-96 months
1.3%

Used Auto Loan Terms

Loan Term
Percentage of Loans
37-48 months
9.2%
49-60 months
22.9%
61-72 months
42.9%
73-84 months
19.0%

As you can see, the highest percentage for both new and used auto loans falls in the 72-month range. Why is this?

Why Longer Auto Loan Terms are Gaining Popularity

The appeal of having a longer auto loan is present for many reasons. Here are some of the most popular reasons why you might choose a longer auto loan.

Smaller Monthly Payments

The longer your auto loan, the more payments you’ll be making on the loan. That means you’re spreading out the cost of your vehicle over an extended period, which reduces your monthly payments.

If you purchase a $25,000 vehicle with an interest rate of 5.5%, here’s how your loan payments will change based on a 48-month auto loan and a 72-month auto loan.

  • 48-month loan
    • Monthly Payment: $579
    • Total Cost of Car: $27,782
  • 72-month loan
    • Monthly Payment: $406
    • Total Cost of Car: $29,215

In this example, you’ll save $173 per month on your auto loan if you extend it from four years to six years.

Keep in mind that the longer your loan term, the longer you’re financing your vehicle, which means you’ll pay more in interest over the life of the loan, as this example shows.

More Flexibility In Your Budget

When you choose a longer auto loan term, you have more flexibility in your budget to allocate the money that you would be paying for your car toward other higher-interest debt.

Compared to many personal loan and credit card interest rates, the rate on a vehicle loan is low.

So, if you compare $25,000 in credit card debt at the average rate of 19% and a $25,000 vehicle at the rate of 5.5%, which would you want to pay off sooner?

Obviously, you want to focus on the higher-interest rate debt.

Here’s an example showing how you’d save more money by paying off your higher-interest debt instead of your vehicle.

Credit Card Debt

  • Total Balance: $25,000
  • Interest Rate: 19%
  • Monthly Payment: $500
  • Months to Payoff: 100 months
  • Interest Paid: $24,926

If you add the $173 from the previous example that you’d save each month by switching from a 48-month loan to a 72-month loan to your credit card payment, here’s how your numbers will change.

  • Total Balance: $25,000
  • Interest Rate: 19%
  • Monthly Payment: $673
  • Months to Payoff: 57 months
  • Interest Paid: $13,006

In this example, you’d save over $11,000 in interest and cut the time to pay off your credit card debt from 100 months (over eight years) to 57 months (over five years).

Compare that to the previous car loan example where you paid $27,782 in total for the car over four years or $29,215 in total over six years.

You’re only saving $1,433 if you focus on paying off your vehicle quicker, compared to the credit card debt example in which you’d save over $11,000 before your car is even paid off.

Afford a More Reliable Vehicle

Another benefit of getting a 72-month auto loan or other long term loan is that you can afford a more reliable vehicle.

Here’s an example based on a monthly car loan budget of $350.

Less Expensive Vehicle

  • Vehicle Price: $15,000
  • Interest Rate: 5.5%
  • Monthly Payment: $329

More Expensive Vehicle

  • Vehicle Price: $20,000
  • Interest Rate: 5.5%
  • Monthly Payment: $327

In this example, your monthly payment is similar; however, you’re able to afford a vehicle that costs $5,000 more. Paying that much more for a car can get you into a more reliable brand, a newer vehicle, or one with more security features.

Who Benefits Most From 72-Month Auto Loans

Based on the advantages of a 72-month auto loan, several people would financially benefit from getting this type of loan. Here are three of the most common. Maybe you can relate...

  • You want a reliable vehicle: You want to purchase a more reliable vehicle but can’t afford one with a shorter loan term.
  • You want to prioritize other debts: You have other high-interest debt that you’re focusing on paying off.
  • You have a limited budget: You can’t afford a higher car payment based on your current budget.

Discover 72-Month Auto Loan Options

Whatever your reason for considering a 72-month auto loan, you must do your research to ensure that you’re making the best decision before making your next car purchase. You get affordability, flexibility in your budget and a reliable vehicle, so for many, it’s a clear choice.

At Chartway, we help our members secure the financing that works for them. Our auto loans come standard with low rates, flexible terms, high loan-to-value financing, no payments for up to 45 days after signing, loan payments skips twice per year, and more.

Check Out Our Financing Options