Why 72 and 84 month loans cost more
Loans of 72 and 84 months are easy to find now, and people take them because they make the monthly payment smaller. That smaller payment is real. So is the cost: you pay interest for more months, and you stay upside down for longer.
The same loan at four lengths
Here is one loan of $30,000 at the same 8% APR, paid over 4, 5, 6 and 7 years. Only the term changes.
Worked example
Same amount, same rate, four terms
Swipe the table sideways to see every column.
| Term | Payment | Total interest | Still owed after 3 years |
|---|---|---|---|
| 48 months | $732.39 | $5,154.72 | $8,419.27 |
| 60 months | $608.29 | $6,497.40 | $13,449.72 |
| 72 months | $526.00 | $7,872.00 | $16,785.41 |
| 84 months | $467.59 | $9,277.56 | $19,153.08 |
The 84 month loan saves $264.80 a month against the 48 month loan, and costs $4,122.84 more in interest.
Look at the last column. After three years on the 84 month loan you have paid $16,833.24. Only $10,846.92 of that came off the loan; $5,986.32 was interest. You still owe $19,153.08, with four years to go. On the 48 month loan you would owe $8,419.27, with one year to go.
Rates, prices and values here are for example only. Payments use the standard loan formula, rounded to the cent.
Why long loans keep you upside down
Two things happen at once. Your balance falls slowly in the early years, because a big share of each payment is interest. And a car loses value fastest in its early years. Put those together and the gap between what you owe and what the car is worth stays open for a long time. The longer the loan, the longer it stays open. The lesson on being upside down explains why that matters.
Longer loans often cost a higher rate, too
The table keeps the rate the same, which is the kind version. Lenders often charge a higher APR for a longer term, because they carry the risk for longer. When that happens, the gap in total interest is bigger than the table shows. Ask for the rate at more than one term and compare them side by side.
The repair years
By the last payment on an 84 month loan, the car is seven years older than the day you bought it. That is when tires, brakes, a battery and bigger repairs tend to show up. On a long loan you can end up paying for the car and fixing it at the same time. On a used car, add the car’s age when you bought it: a five year old car on a seven year loan is twelve years old at the last payment.
When the long loan is the only way the payment fits
That is worth noticing. If the payment only works at 84 months, the car is probably more than the budget can carry comfortably. The usual ways out are a cheaper car, a bigger down payment, or waiting a few months to save more. The lesson on budget and down payment walks through what fits.
If you do take a long loan, you can still pay it like a short one. Pay extra toward principal whenever you can, and check that the contract has no penalty for paying early.
What to do next
- When a dealer quotes a payment, ask for the term and the total of payments with it.
- Ask for the APR at 48, 60 and 72 months and compare the totals.
- If only a long term fits, look at a cheaper car or a bigger down payment before you sign.
- If you already have a long loan, pay extra toward principal when you can.
- Try different terms in the payment calculator.
Sources
Try your own numbers
Payment calculator
Your payment, the total, and how long you would be upside down.
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The real APR, the lines you can say no to, and money the sheet hides.
Out the door price
Every fee and tax in one total, and up to three dealers side by side.
Education, not financial or mechanical advice. Have any used car checked by a mechanic you trust before you buy.