Five year loans have always been the norm for new car buying but in the fourth quarter of 2012 the average term was 65 months according to Experian Information Solutions. This is due to lenders offering new, longer terms loans with six, seven, and even eight year loans. These longer term loans offer lower monthly payments, allowing buyers to get the cars they want more easily.
Lower payments might seem like a great way to afford more car but there are drawbacks. Longer terms often mean higher interest rates to begin with. Higher interest rates combined with more payments creates significantly higher total cost compared to shorter term loans. In general, the faster a car loan is paid off the lower the overall total cost.
