84-Month Auto Loans: Smart Move or Financial Trap?

Navigating the Maze of Auto Loans: Are 84-Month Terms a Smart Move or a Financial Pitfall?

John: Welcome, everyone, to our deep dive into the world of auto financing. Today, we’re tackling a topic that’s becoming increasingly common yet often misunderstood: the 84-month auto loan. That’s a seven-year commitment to car payments, and it’s a significant financial decision that warrants careful consideration. We’ll break down what these loans entail, who they might be for, and the crucial financial advice you need before signing on the dotted line.

Lila: Thanks, John! It’s great to be here. Seven years does sound like a very long time to be paying for a car. I’m guessing the main appeal is a lower monthly payment, right? But what are the hidden catches? I’m eager to explore this because cars are such a huge part of many people’s lifestyles and budgets.

Basic Info: Understanding Auto Loans and the Rise of the 84-Month Term

John: Precisely, Lila. An auto loan, at its core, is a sum of money borrowed from a lender to purchase a vehicle. You agree to pay back that amount, plus interest, over a set period, known as the loan term. These terms traditionally ranged from 36 to 60 months (three to five years). However, we’re seeing a significant shift. As the Apify search results highlight, one article from AWealthOfCommonSense.com notes that 20% of new vehicles purchased in the first quarter of 2025 used 84-month financing. That’s a substantial portion of the market.

Lila: Wow, one in five new car buyers opting for a seven-year loan! Why the surge, John? Is it just about those lower monthly payments, or are cars getting that much more expensive? Or perhaps a combination of both?

John: It’s definitely a mix. Car prices have indeed risen, and features that were once luxury are now standard, pushing up the average transaction price. To make these more expensive vehicles “affordable” on a monthly basis, lenders and dealerships have stretched out the loan terms. An 84-month loan spreads the principal (the amount borrowed) over more payments, thus reducing each individual payment. But, and this is a big “but,” it usually means you pay significantly more interest over the life of the loan.

Lila: That makes sense. So, you get the immediate relief of a smaller monthly bill, but the long-term cost can be much higher. It’s like paying for convenience, but the convenience comes with a hefty interest tag. Are these 84-month loans available for both new and used cars?

John: Yes, they are. For instance, the USAA result mentions that financing for 84-month terms is available on new auto loans (model years 2024 to 2026) and used auto loans (model years 2018 to 2023), though often with certain conditions like a minimum financed amount. Experian also confirms that auto loan terms usually range from 24 to 84 months, covering both new and used vehicles.

Supply Details: Where to Get Auto Loans and What to Look For

Lila: So, if someone is considering an auto loan, whether it’s for 60 months or those longer 84 months, where are the main places they can go to get one?

John: There are several primary sources for auto loans. Let’s break them down:

• Banks: Traditional banks, both national and local, are a common source. If you have an existing relationship with a bank, you might find a streamlined process.
• Credit Unions: These are member-owned financial cooperatives, and they often offer some of the most competitive rates and favorable terms. The search results from Oregon State Credit Union and Credit Union 1 highlight attractive rates, and IFCU.com even has a blog post titled “Credit Union Auto Loan Rates: Why They Are Often Better Than Banks.”
• Dealership Financing: This is financing arranged by the car dealership itself. It can be convenient as it’s a one-stop-shop, but it’s crucial to compare their offers carefully. Dealerships often work with multiple lenders, including the manufacturer’s own financing arm (like Ford Credit or Toyota Financial Services).
• Online Lenders: Companies like LendingTree and LightStream (a division of Truist Bank, often featured on sites like Bankrate) operate primarily online and can offer competitive rates due to lower overhead.

Lila: That’s a good overview. With dealerships, I’ve heard they sometimes mark up the interest rate offered by the bank to make a profit. Is that common, and how can a buyer protect themselves?

John: That can happen, yes. It’s called “dealer reserve” or “rate markup.” The best protection is to get pre-approved for a loan from your bank or a credit union *before* you even step into a dealership. This pre-approval gives you a benchmark. You’ll know what rate you qualify for, and you can then see if the dealership can beat it. If they can, great. If not, you have your pre-approved loan to fall back on. Knowledge is power in these negotiations.

Lila: Pre-approval sounds like a smart first step. When people are comparing loan offers, say from Bankrate or LendingTree, what are the key things they should be looking at besides the interest rate and the term length?

John: Excellent question. Beyond the APR (Annual Percentage Rate) and the loan term, borrowers should scrutinize:

• Fees: Are there any origination fees (a fee to process the loan), prepayment penalties (a fee if you pay off the loan early), or late payment fees? United Federal Credit Union, for example, mentions “no application or prepayment fees” for their auto loans up to 84 months.
• Loan Amount Limits: Some lenders have minimum or maximum loan amounts. LendingTree notes loan amounts up to $100,000.
• Down Payment Requirements: A larger down payment can significantly reduce your loan amount and potentially secure you a better interest rate. It also helps avoid being “upside down” on your loan, which we’ll discuss later.
• Specific Conditions: Some loans might have restrictions, like being for specific model years, as we saw with the USAA example.
• Lender Reputation and Customer Service: Check reviews and see how the lender treats its customers. Bankrate mentions their best auto loans are selected based on rates, terms, customer experience, and transparency.

Technical Mechanism: Demystifying APR, Amortization, and LTV

John: Now, let’s get into some of the nuts and bolts, Lila. Understanding terms like APR, amortization, and LTV is crucial for anyone taking out an auto loan, especially a long-term one.

Lila: Okay, I’m ready! Let’s start with APR. I see it everywhere, but what exactly is it, and how is it different from just the “interest rate”?

John: That’s a common point of confusion. The interest rate is simply the cost of borrowing the principal amount, expressed as a percentage. The APR (Annual Percentage Rate) is a broader measure of the cost of borrowing. It includes the interest rate *plus* certain other fees associated with the loan, such as loan origination fees or dealer fees that might be rolled into the financing. So, the APR gives you a more complete picture of the annual cost of your loan. When comparing loan offers, always compare APRs, as this provides a more apples-to-apples comparison.

Lila: Got it. So APR is like the all-inclusive price tag for borrowing. What about amortization? That sounds a bit complicated.

John: It does, but the concept is straightforward. Amortization refers to how your loan payments are structured over time to pay off the debt. With most auto loans, each monthly payment is split into two parts: one part goes towards paying down the principal (the amount you borrowed), and the other part goes towards paying the interest. In the early stages of the loan, a larger portion of your payment goes towards interest. As you continue to make payments, more of each payment starts going towards the principal. An amortization schedule is a table that shows exactly how much of each payment goes to principal and interest over the entire loan term.

Lila: So with a longer loan, like 84 months, you’d be paying mostly interest for a longer initial period? That means it takes longer to build equity in the car?

John: Precisely. And that leads us directly to LTV (Loan-to-Value ratio). LTV compares the amount of your loan to the actual market value of your car. For example, if you borrow $25,000 for a car that’s worth $25,000, your LTV is 100%. If you make a $5,000 down payment and borrow $20,000 for that same car, your LTV is 80% ($20,000 / $25,000). Lenders prefer lower LTVs because it means less risk for them. A high LTV, especially over 100% (which can happen if you roll in taxes, fees, or negative equity from a previous car loan), puts you at risk of being “upside down” or “underwater.”

Lila: And “upside down” means you owe more on the car than it’s actually worth, right? That sounds like a precarious situation, especially with how quickly cars depreciate.

John: Exactly. Cars are depreciating assets – they lose value over time, especially in the first few years. If you have an 84-month loan with a small or no down payment, the car’s value could drop faster than your loan balance, leaving you with negative equity. This is a significant risk with long-term auto loans. Rhode Island Credit Union mentions financing available up to 125% loan to value, which is something borrowers should approach with extreme caution.

Who Provides Financial Advice and Support?

Lila: This all sounds like a lot for an average car buyer to navigate. Where can people turn for reliable financial advice when they’re considering such a significant commitment like an 84-month auto loan?

John: That’s a vital point. Seeking advice is wise. Several resources can help:

• Certified Financial Planners (CFPs): These professionals can provide holistic financial advice, helping you understand how a large car loan fits into your overall financial picture, including savings, investments, and debt management. They can help you budget and determine what you can truly afford.
• Credit Counselors: Reputable non-profit credit counseling agencies can offer guidance on debt management and budgeting. They can be particularly helpful if you’re struggling with existing debt or unsure about taking on more.
• Financial Advisors at Banks/Credit Unions: Many financial institutions, like Oregon State Credit Union mentioned in the search results, have financial advisors who can discuss loan options and their implications. LendingTree also explicitly states, “Consult your financial advisor to see if refinancing your auto loan is right for you.”
• Reputable Financial Websites and Publications: Sites like NerdWallet, Bankrate, Experian (all featured in our search data), and Consumer Reports offer a wealth of articles, tools, and calculators. However, it’s important to discern objective advice from sponsored content.

Lila: How do you find a *trustworthy* financial advisor, though? It seems like some might just be trying to sell you a product.

John: That’s a valid concern. Look for advisors who are fiduciaries. A fiduciary is legally obligated to act in your best financial interest. Ask about their qualifications (like CFP certification), how they are compensated (fee-only is often preferred over commission-based, as it reduces conflicts of interest), and ask for references. Don’t be afraid to interview a few before settling on one.

Lila: “Fiduciary” – that’s a key term to remember. So, these experts can help you weigh the pros and cons of, say, a lower monthly payment with an 84-month loan versus a higher payment with a shorter term, considering your personal financial health?

John: Absolutely. They can help you run the numbers, consider the total interest paid, and think about opportunity costs – what else could you do with that money if you weren’t tied to a seven-year car payment or if you paid less interest overall? They can also help you understand the impact on your credit score and your ability to secure other loans in the future.

Use-Cases & Future Outlook: When Might an 84-Month Loan Make Sense (and When Not To)?

John: We’ve touched on the main allure of an 84-month auto loan: that lower monthly payment. This can make a more expensive car seem accessible, or simply ease monthly budget strain. However, the situations where it’s truly a *good* financial decision are quite limited.

Lila: So, are there any scenarios where an expert might say, “Okay, an 84-month loan isn’t ideal, but in *this specific case*, it could be a reasonable option”?

John: Perhaps, but with strong caveats. For example, if someone has a very stable job, plans to keep the car for well over seven years (maybe 10-12 years), secures an exceptionally low promotional APR (which is rare on such long terms), and the lower payment allows them to aggressively pursue other high-priority financial goals like paying off high-interest debt or maximizing retirement contributions. Even then, it’s a trade-off. The risk of being underwater for an extended period remains high, and the total interest paid will still be substantial.

Lila: That makes sense. It’s about balancing immediate cash flow needs with long-term financial health. What about the future outlook? The AWealthOfCommonSense.com article mentioned that the trend of 84-month financing will likely continue to increase. Do you see loan terms getting even longer, John? Are we going to see 96-month or even 120-month car loans?

John: It’s certainly a possibility, unfortunately. As car prices continue to climb and incomes may not keep pace, there’s pressure to extend terms to maintain perceived affordability. Some lenders are already quietly offering 96-month terms, though it’s not widespread. However, the longer the term, the greater the risk for both the lender and the borrower. Regulators might also step in if terms become excessively long and lead to widespread consumer harm due to defaults and negative equity.

Lila: It feels like a dangerous cycle. Longer loans mean people can “afford” more expensive cars, which might encourage manufacturers to keep prices high, leading to a need for even longer loans. What are the biggest downsides people often overlook when they’re tempted by that low monthly payment from an 84-month loan?

John: The biggest ones are:

• Total Interest Paid: As we’ve said, it’s significantly higher. You might save $50-$100 a month, but end up paying thousands more over seven years.
• Negative Equity: Being “upside down” for a longer period. If the car is totaled in an accident or stolen, GAP insurance (Guaranteed Asset Protection) becomes almost essential, adding to the cost.
• Repair Costs: Most manufacturer warranties expire long before seven years. So, you could be making car payments *and* paying for significant repairs on an aging vehicle simultaneously.
• Changing Needs: Seven years is a long time. Your family situation, job, or transportation needs might change, but you’re still locked into that car and loan. Selling or trading in a car with negative equity is a financial headache.
• Reduced Future Flexibility: A long car loan payment can impact your ability to save for other goals, invest, or handle unexpected financial emergencies.

Competitor Comparison: Weighing Different Loan Terms

Lila: Could we look at a practical example, John? Say someone wants to borrow $25,000 for a new car. How would the payments and total interest compare across different loan terms, like 60 months versus 84 months?

John: Absolutely. Let’s use a hypothetical example. Assume a $25,000 loan amount. Interest rates often vary by term length, with shorter terms sometimes getting slightly better rates, but for simplicity, let’s assume a consistent APR of 7% for this illustration.

• For a 60-month (5-year) loan at 7% APR:
  • Monthly Payment: Approximately $495
  • Total Interest Paid: Approximately $4,700
  • Total Repaid: Approximately $29,700
• For an 84-month (7-year) loan at 7% APR:
  • Monthly Payment: Approximately $377
  • Total Interest Paid: Approximately $6,668
  • Total Repaid: Approximately $31,668

Lila: Wow, that’s a clear difference! The monthly payment is about $118 lower with the 84-month loan, which sounds tempting. But you end up paying almost $2,000 more in interest over the life of the loan. That’s a significant chunk of money.

John: Exactly. And this is a simplified example. In reality, interest rates for 84-month loans can sometimes be higher than for 60-month loans because the lender is taking on more risk for a longer period. Let’s look at some real-world examples from the search results. Oregon State Credit Union mentions a $20,000 used auto loan with an 84-month term having a 7.23% APR and a monthly payment of $304.06. Credit Union 1 shows an example of a $20,000 auto loan at 5.99% APR for an 84-month term resulting in a monthly payment of approximately $292.08. This highlights how much rates can vary between lenders, even for the same term.

Lila: So, shopping around for the best APR is critical, especially with longer terms. The U.S. News article on “How to Finance a Car” mentions that taking out a smaller loan can shorten the loan term or reduce your monthly payment, and you’ll pay less interest. This seems like solid advice – maybe aim for a less expensive car or make a larger down payment to avoid needing such a long term?

John: That’s generally the wisest financial strategy. The less you borrow, and the shorter the term, the less interest you’ll pay overall. It might mean making some compromises on the car itself – perhaps a slightly older model, fewer bells and whistles, or a certified pre-owned vehicle instead of brand new. But the long-term financial benefits can be substantial.

Lila: And it’s not just comparing 60 vs. 84 months. The search results show terms like 24, 36, 48, 72 months are also common. Experian notes auto loan terms usually range from 24 to 84 months, and Apple FCU mentions a 36-month term for their “as low as” advertised rate. Shorter terms clearly save on interest but mean higher monthly payments.

John: Correct. Each term length has its own implications for monthly cash flow and total cost. Borrowers need to find a balance that fits their budget responsibly without overextending themselves or paying excessive interest. A good loan calculator, available on many financial websites, can help visualize these differences clearly.

Risks & Cautions: The Pitfalls of Extended Car Loans

John: We’ve touched on several risks, but it’s worth dedicating a section to really hammer home the potential downsides of 84-month auto loans. They aren’t inherently bad for everyone in every situation, but the pitfalls are significant and numerous.

Lila: I think the biggest one we’ve discussed is negative equity, or being “upside down.” Can you elaborate on why that’s such a problem, especially with a seven-year loan?

John: Certainly. Negative equity occurs when the amount you owe on your car loan is greater than the car’s current market value. Cars depreciate rapidly, especially in the first few years. With an 84-month loan, your principal balance decreases very slowly in the initial years because a larger portion of your payment goes to interest. So, for a significant portion of those seven years – potentially three, four, or even five years – you could easily be upside down.
Now, why is this a problem?

• If your car is totaled or stolen: Your insurance company will typically only pay out the current market value of the car. If you owe $20,000 but the car is valued at $15,000, you’re still responsible for that $5,000 difference, even though you no longer have the car. This is where GAP (Guaranteed Asset Protection) insurance comes in, but that’s an added cost.
• If you need or want to sell/trade-in the car early: If you sell the car for $15,000 but owe $20,000, you’ll need to come up with $5,000 cash to pay off the loan before you can transfer the title. Alternatively, some dealers might offer to roll that $5,000 negative equity into your next car loan, which just digs the financial hole deeper for the next vehicle.

Lila: Rolling negative equity into a new loan sounds like a terrible trap! And the Bankrate article specifically warned, “If you take an 84-month auto loan, you will pay significantly more interest and make payments for much longer, even if your monthly payment is lower.” That higher total interest cost is another major caution, right?

John: Absolutely. We saw that in our earlier example. That extra $2,000, $3,000, or even more in interest over seven years is money that could have gone towards savings, investments, paying down other debt, or simply enjoying life. It’s the silent cost of that lower monthly payment.

Lila: What about the car itself? Seven years is a long time to own the same vehicle. People’s needs change, and cars age. Are there risks associated with the vehicle’s condition over such a long loan term?

John: Definitely.

• Warranty Expiration: Most new car comprehensive warranties last for 3 years/36,000 miles or maybe 5 years/60,000 miles. Powertrain warranties might go longer, but by year six or seven of your loan, you’re likely well out of most warranty coverage.
• Increased Maintenance and Repair Costs: As a car ages and racks up mileage, it will inevitably require more maintenance and repairs. You could find yourself in a situation where you’re still making substantial monthly loan payments on a car that also needs expensive repairs (e.g., new transmission, AC system). This is a double whammy to your budget.
• Vehicle Obsolescence/Desire for New Features: Technology in cars changes rapidly. In seven years, the safety features, fuel efficiency, and infotainment systems in new cars will likely be far advanced compared to your seven-year-old model. You might want an upgrade long before your loan is paid off.

Lila: That makes a lot of sense. So, you could be paying for a car that feels outdated and is costing you more in upkeep, all while still being tied to it financially. It highlights the importance of considering the total cost of ownership, not just the monthly loan payment.

John: Precisely. The total cost of ownership includes the loan payments, insurance, fuel, maintenance, and repairs. With an 84-month loan, the loan payment part stretches out, but the other costs, particularly maintenance and repairs, are likely to increase towards the end of that loan term.

Expert Opinions / Analyses

John: Most financial experts and consumer advocates generally advise caution when it comes to very long auto loan terms like 84 months. The consensus is that while they offer the immediate gratification of a lower monthly payment, the long-term financial risks and costs often outweigh this benefit.

Lila: So, what are some of the common refrains we hear from these experts? Based on the search results, sites like Bankrate, NerdWallet, and Experian seem to provide a lot of this analysis.

John: Yes, they do. Key themes from expert analyses include:

• Focus on Total Cost: Experts consistently emphasize looking beyond the monthly payment to the total interest paid over the life of the loan. An 84-month loan will almost always cost you more in interest than a shorter-term loan for the same car and interest rate. The IFCU blog, for instance, notes that “Longer terms (like 72 or 84 months) might give you lower monthly payments, but you’ll pay more in interest over time.”
• The Danger of Depreciation: They highlight how quickly cars lose value and how an 84-month loan increases the risk and duration of negative equity.
• Advocacy for Shorter Terms: Most recommend aiming for the shortest loan term you can comfortably afford, ideally 60 months or less. U.S. News Cars, in their “How to Finance a Car” piece, points out that a shorter loan term means paying less interest.
• Importance of a Down Payment: A significant down payment (20% for a new car, 10% for a used car is a common recommendation) can help offset initial depreciation, reduce the amount financed, potentially secure a better interest rate, and lessen the need for a very long loan term.
• Buy What You Can Afford: This might sound obvious, but experts urge buyers to choose a vehicle that fits their overall budget, not just one where they can manage the monthly payment by stretching the loan term to its limits. This might mean opting for a less expensive model or a used car.
• Get Pre-Approved for a Loan: This advice is universal – secure financing from a bank or credit union before visiting the dealership to have a strong negotiating position.

Lila: It sounds like the core message is financial prudence and long-term thinking over short-term payment relief. Are there *any* financial experts who see more widespread benefits to 84-month loans, or is the caution pretty universal?

John: The caution is indeed widespread. While you might find articles discussing them as a “tool” that *can* be used, it’s almost always accompanied by a long list of warnings. The general sentiment is that if you *need* an 84-month loan to afford a particular car, you might be looking at a car that’s too expensive for your budget. There isn’t a significant school of thought among financial planners championing seven-year car loans as a good standard practice.

Lila: That’s quite telling. The AWealthOfCommonSense.com article even titled its piece “84-Month Auto Loans?!”, with the interrobang suggesting a sense of surprise or concern. It mentions 20% of new vehicles in Q1 2025 used such financing and guesses it will increase. This suggests it’s a growing trend, even if experts are wary.

John: Exactly. It’s a trend driven more by market pressures (rising car prices, desire for lower monthly payments) than by sound financial principles for the average consumer. The availability of these loans doesn’t automatically make them a wise choice. As consumers, we need to be educated and make decisions that support our overall financial well-being, not just acquire the newest, shiniest vehicle by any means necessary.

Latest News & Roadmap (Trends in Auto Financing)

John: The auto financing landscape is constantly evolving, Lila. We’re seeing shifts in interest rates, loan terms, and borrower behavior, all influenced by broader economic conditions.

Lila: So, what are some of the current key trends? We know 84-month loans are on the rise. What about interest rates? Are they generally going up or down?

John: According to a NerdWallet article referenced in the search results, in the fourth quarter of 2024, the overall average auto loan interest rate was 6.35% for new cars and a significantly higher 11.62% for used cars. These rates can fluctuate based on Federal Reserve policies, inflation, lender competition, and, of course, an individual’s creditworthiness. Generally, when the economy sees rising interest rates, auto loan rates tend to follow suit.

Lila: 11.62% for used cars is quite high! That would make an 84-month loan on a used car incredibly expensive in terms of total interest paid. How much does credit score affect these rates?

John: Immensely. Your credit score is one of the most critical factors determining the interest rate you’ll be offered. Borrowers with excellent credit (typically 760 and above) will qualify for the lowest rates, while those with fair or poor credit will face much higher rates, making borrowing significantly more expensive. This is consistent across all types of loans, but particularly impactful with large, long-term commitments like auto loans.

Lila: The Experian blog on “Auto Loan Rates and Financing for 2025” probably delves into this. It makes sense that lenders charge more for perceived higher risk. What about other trends? Are there any new types of auto loan products or features emerging?

John: We’re seeing more lenders emphasize flexible terms, as noted by several credit unions in the search results (like DCU and United Federal Credit Union offering terms up to 84 months). Some lenders are also promoting features like “defer your first auto loan payment for 90 days,” as seen with SDFCU. While this can provide temporary breathing room, it’s important to remember that interest usually still accrues during that deferment period, potentially increasing the total loan cost slightly.

Lila: So, the “roadmap” seems to point towards continued availability of long loan terms due to affordability pressures. Are regulators showing any concern about this trend, or is it mainly up to consumer awareness and lender discretion?

John: Regulators like the Consumer Financial Protection Bureau (CFPB) keep an eye on lending practices to protect consumers. While there haven’t been major regulatory crackdowns specifically on 84-month loan terms, there’s always ongoing scrutiny of lending standards, disclosures, and fairness in the auto loan market. If default rates on these long-term loans were to spike significantly and cause widespread consumer harm, we might see more regulatory attention. For now, the emphasis is largely on lenders assessing risk responsibly and borrowers being well-informed.

Lila: It sounds like the “buyer beware” principle is especially strong here. And staying updated on current average rates through resources like Bankrate’s “Average auto loan interest rates by credit score” can help set realistic expectations before even starting the car buying process.

John: Precisely. Knowing the current market conditions and what rates people with similar credit profiles are getting is crucial for negotiating effectively and not overpaying for financing. The Veridian Credit Union site simply says, “Get a car loan year-round with easy online payments and a great low auto loan rate, always,” which highlights the competitive nature but also the need for consumers to verify what “great low rate” means for them personally.

FAQ: Answering Your Burning Questions About Auto Loans

John: Let’s tackle some frequently asked questions. I’ll start: What exactly is an 84-month auto loan?

Lila: I can take that one! An 84-month auto loan is a loan used to finance the purchase of a car, with a repayment period spread out over 84 months, which is equivalent to seven years. This longer term typically results in lower monthly payments compared to shorter-term loans, but usually means paying more total interest over the life of the loan.

John: Good summary. Next question: What credit score do I generally need to qualify for an auto loan, and specifically for an 84-month term?

Lila: Generally, a higher credit score will get you better terms and lower interest rates. Most lenders prefer scores in the “good” to “excellent” range (typically 670 and above). For an 84-month loan, because it’s a longer risk for the lender, they might have slightly stricter credit requirements or charge higher rates for those with less-than-perfect credit. Some lenders do offer auto loans for bad credit, as Credit Karma discusses, but the interest rates will be substantially higher, making an 84-month term even more costly.

John: That’s right. Okay, Lila, your turn to ask one.

Lila: Alright, John: Can I get an 84-month auto loan for a used car, or is it only for new cars?

John: You can often get 84-month loans for used cars, but there might be more restrictions. For example, the USAA search result mentioned 84-month terms for used auto loans on model years 2018 to 2023. Lenders may have age and mileage limits for used cars qualifying for such long terms. Also, as NerdWallet’s data showed, interest rates for used car loans are generally higher than for new car loans, so an 84-month used car loan could come with a hefty interest rate.

Lila: That makes sense due to the higher risk and depreciation of older vehicles. Here’s another common one: Are there prepayment penalties if I want to pay off my 84-month auto loan early?

John: It varies by lender, but many auto loans, especially from reputable banks and credit unions, do *not* have prepayment penalties. For instance, Rhode Island Credit Union explicitly states “No prepayment penalties” on their auto loans. However, it’s always crucial to read the loan agreement carefully and ask the lender directly before signing. Some less scrupulous lenders, particularly in the subprime market, might include them.

Lila: Good to know – always read the fine print! How about this: My main goal is to have the lowest possible monthly car payment. Is an 84-month loan my best or only option?

John: While an 84-month loan will likely offer a very low payment for a given car price, it’s not the only strategy, and often not the best. The U.S. News article “How to Finance a Car” suggests that taking out a smaller loan is key. You can achieve this by:

• Making a larger down payment.
• Choosing a less expensive car.
• Negotiating a better purchase price for the vehicle.

These steps reduce the principal amount you need to borrow, which can lead to lower payments even on shorter, more financially sound loan terms, and will definitely save you interest.

Lila: So focusing on reducing the *amount borrowed* is often more effective long-term than just stretching out the payments. Last one from me: Is refinancing an auto loan a good idea, and can I refinance an 84-month loan?

John: Refinancing can be a very good idea, especially if your credit score has improved since you took out the original loan, or if interest rates have generally fallen. By refinancing, you might secure a lower interest rate, which could reduce your monthly payment or allow you to pay off the loan faster with less total interest. The LendingTree result specifically says, “Consult your financial advisor to see if refinancing your auto loan is right for you.” You can typically refinance any auto loan, including an 84-month one, provided you meet the new lender’s criteria. The goal would often be to get a lower rate and, if possible, shorten the remaining term.

Related Links & Resources

John: To wrap things up, for our readers who want to delve deeper or are actively in the car-buying process, there are many excellent resources available online. We’ve mentioned several throughout our discussion.

Lila: Yes! So, if people want to compare current auto loan rates, where should they look?

John: Reputable financial comparison websites are a good starting point. Sites like:

• Bankrate.com: They offer comparisons of auto loan rates and have articles on average interest rates.
• LendingTree.com: Allows you to get multiple loan offers by filling out one form.
• NerdWallet.com: Provides educational content, reviews, and loan comparison tools.
• Experian.com: Offers credit resources and information on auto financing.

Additionally, check directly with local banks and credit unions, as they often have competitive offers not always listed on large comparison sites. Oregon State Credit Union, Credit Union 1, United Federal Credit Union, and Veridian Credit Union were all mentioned in our initial search data as offering auto loans, some with terms up to 84 months.

Lila: What about tools like auto loan calculators? They seem really helpful for understanding payments and total interest.

John: Absolutely. Most of the sites mentioned above offer free auto loan calculators. These tools allow you to input different loan amounts, interest rates, and terms (like 60, 72, or 84 months) to see how the monthly payment and total interest paid would change. This can be incredibly insightful when trying to determine what you can truly afford and the long-term cost of different financing options.

Lila: And for general financial advice, beyond just the loan itself?

John: For broader financial planning, consider resources from organizations like the National Foundation for Credit Counseling (NFCC) or the Financial Planning Association (FPA). And, as we discussed, consulting with a qualified, fiduciary financial advisor can provide personalized guidance tailored to your specific situation.

Lila: This has been incredibly informative, John. The key takeaway for me is that while an 84-month auto loan can make a car payment seem more manageable on a monthly basis, it’s crucial to understand the significantly higher total interest cost and the risks like negative equity and being tied to an aging car for seven long years. It really underscores the importance of doing your homework, shopping around for the best loan terms, and considering your overall financial health before committing.

John: Well said, Lila. It’s all about making informed choices. A car is a necessity for many, but the way you finance it can have long-lasting effects on your financial freedom. Prioritize what’s truly best for your financial future, not just what gets you the keys to a new car with the lowest immediate monthly outlay.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Always do your own research (DYOR) and consult with a qualified financial professional before making any significant financial decisions.

Auto Loans, 84-Month Loans, Car Financing, Financial Advice, Vehicle Purchase

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