Is An 84-Month Auto Loan A Good Idea? (2024) (2024)

An 84-month auto loan gives you seven years to repay the lender. While shorter term lengths are more ideal, the most common term length in the American auto market is 72 months, according to Edmunds.

As car prices rise, 84-month auto loans are becoming more popular. Splitting your car payments up over a longer term can bring your monthly obligation down — often significantly. The downside is that with those lower monthly payments comes more time to generate interest, along with other potential risks.

Auto loans lasting 84 months are more common than they used to be. However, they’re still not as common among lenders as 24- to 72-month terms. You have a few options for an 84-month auto loan.

Banks

Traditional banks are often the first stop when borrowers are shopping for car loans. With many of the biggest banks now offering 84-month financing, it might be worth seeing if yours is one of them.

Some banks will offer you a discount on your auto loan rate if you have a checking account, savings account, credit card or other financial account with them. Even if your bank doesn’t, the convenience of having all your banking in one place is worth considering.

Credit unions

Credit unions offer many of the same advantages as commercial banks do, but in the form of member-based organizations. While credit unions may offer low rates and few fees, they require membership based on specific criteria to access their loan products.

Credit unions’ membership requirements range from working for a certain employer to making a donation to an approved charitable organization to paying a membership fee. Many operate nationwide and offer 84-month auto loans as part of their portfolios.

Online lenders

You can also go the digital route for an 84-month loan. As more people shop for cars on the internet, online lenders are becoming a more popular source of financing. You’ll find plenty of options that offer longer loan terms.

And just because online lenders don’t have physical branches doesn’t mean they’re not reputable providers. Many are backed by established banks, and some are even the online lending face of a bigger bank.

Lending marketplaces

With a lending marketplace, rather than applying with individual lenders, you enter your information into a portal and wait for loan offers.

In addition to cutting down on the legwork, this option lets you compare loan offers in one place. However, if you use one of these marketplaces, research lenders carefully. While you’ll get offers from established lenders, you may also get offers from less reputable ones.

Car dealerships

Most car dealers provide their own financing options, and many offer 84-month vehicle loans. You may be able to find a great deal on a long-term auto loan. Dealerships — especially single-brand dealerships — sometimes offer 0% auto financing, even on longer-term loans.

Don’t just assume you’ll get your best deal at the dealership. Car buyers may also find some of the highest interest rates at dealerships.

Current auto loan interest rates can be anywhere from 5.18% to 21.32% on average. Rates for 84-month auto loans are typically on the higher side and vary widely based on the lender you choose and other factors.

While the term length is a factor in the overall cost of your loan, it’s not the only one. Credit score is the primary factor used to determine rates along with whether the vehicle is new or used, and your overall credit history. The graph below shows the average interest rates for new and used car loans based on different credit scores, according to data from Experian.

Below you can compare rates and terms for an 84-month auto loan and those for smaller time periods. When using this auto loan calculator, you can also get offers for your estimated monthly payment.

There are many reasons why an 84-month auto loan might not be your best option. Here are a few of them:

• You’ll end up paying for it: The temptation to have a little extra cash each month can be strong. But if you can easily afford a shorter repayment term, it’s the better option. You’ll save money in the long run and turn a liability into an asset sooner.
• You’ll need money for repairs: Cars typically need repairs more frequently over time. Most bumper-to-bumper warranties for new cars only last for 3 years/36,000 miles. So with an 84-month car loan, you’ll have four years in which you’ll need to make monthly payments and likely pay for repairs more often.
• You can probably find better interest rates: Longer loan terms typically come with higher interest rates. The fact that 84-month auto loans tend to be marketed to people with lower incomes and credit scores means there’s a good chance you’ll face steeper rates.

Signing up for an 84-month auto loan comes with serious drawbacks. There are a few things you should take into consideration before taking one on.

You’ll Pay More in Interest

The most obvious downside of an 84-month auto loan is that you’ll pay more in interest over the life of the loan. Longer loan terms tend to have the highest interest rates, but they can also increase the total interest you pay in other ways.

Since you’d pay less each month, you’d also pay less toward your loan principal — the original amount you borrowed. As a result, you’ll pay more in interest for a longer period of time toward the start of your loan.

The table below shows how different loan terms affect the total amount of interest that would be paid on a $25,000 loan with a 5.2% interest rate.

You May be Upside Down on Your Loan

Owing more on your vehicle than it’s worth is known as being upside down on your auto loan. This state of negative equity, also known as being underwater, is a dangerous place to be financially. It puts you at risk of having to make loan payments on a car you no longer have if it’s totaled.

How long you spend upside down depends on how much you put down on a vehicle, your loan term and how quickly your vehicle depreciates. Taking on an 84-month auto loan could leave you underwater for years.

You’ll be Paying For Your Car For a Long Time

Once you pay a car loan off, the remaining equity in your vehicle is a financial asset. However, the older your vehicle is and the more miles it has, the more it depreciates.

With an 84-month loan, you’ll be paying for your car for seven years. Even if you buy a brand-new vehicle, your car will be more than seven years old by the time you finish paying for it. While it will still have some value, it will be significantly lower than if the car were newer.

Despite its many drawbacks, an 84-month auto loan may be a good choice for you in certain scenarios, such as:

• It’s all you can afford: When looking for an auto loan, consider how much car you can afford. You can look for a less expensive car, but an 84-month auto loan may be the only way you can afford the monthly payment for the car you want.
• There are no prepayment penalties: If you can pay an 84-month auto loan off early, you can avoid paying the additional interest. But some auto loans come with prepayment penalties that could cost you more. Compare lenders to see which ones charge these fees.
• You plan to refinance later: If you expect your financial situation to improve, it can make sense to get a lower monthly payment now and refinance your auto loan to a shorter term when you can afford a higher payment.
• You get a 0% interest offer: Financing offers with a 0% annual percentage rate (APR) for an 84-month loan term aren’t common, but they’re out there. With 0% APR car deals, there’s no cost difference between shorter terms and longer terms, and you can use the difference in monthly payments for something else.

Despite the drawbacks, there are some advantages to 84-month car loans. Depending on your situation, a longer loan term could work out in your favor.

You’ll Have Lower Monthly Payments

The main advantage of an 84-month loan is that you’ll have a lower monthly payment. Even if you can afford to pay more now, your financial situation could change overnight. Having a lower monthly payment can insulate you from the risk of not being able to repay your loan and losing your car.

You May be Able to Refinance

Source: Capital One

Sometimes, getting an 84-month auto loan is a necessity. It’s useful to remember that you may be able to refinance your auto loan in the future.

When you refinance your auto loan, you get a new loan to pay off your existing one. If you can manage bigger payments in the future, you may manage to get a refinancing loan with a shorter term. You may even be able to do so at a lower interest rate.

Can I Use an 84-month Auto Loan to Pay Debt Down?

While an 84-month auto loan may not have the best interest rate, it may have a lower rate than some credit cards or other loans. Some people use the relatively low interest rates of car loans to refinance their credit card debt, for example.

Here’s how a cash-out refinance works: If your car is relatively new and you’ve paid off a good portion of the principal, you have equity in the car. You can get an 84-month cash-out refinance auto loan with a small down payment to withdraw that equity. You can then use the equity to pay down higher-interest debt like credit cards and personal loans.

A cash-out auto refinance won’t change the total amount of your debt, but you could pay much less interest on what you owe.

For people who can afford shorter terms, 84-month auto loans are generally too expensive to recommend. But for those who can’t afford the cars they want without taking on longer loan terms, they can be useful. Auto loan calculators can help you get a better idea of how much your monthly payments and total interest would be with different loan terms.

If you’ve decided that an 84-month auto loan is the right move for you, it’s important to find a reputable provider. When you’re looking for a car loan, the only way to make sure you get the best rates is to get offers from multiple lenders and compare them. We recommend starting with myAutoloan and Consumers Credit Union to find the best 84-month auto loan rates.

myAutoloan: Best Low-rate Option

As a car financing marketplace, myAutoloan is a great place to seek out multiple auto loan offers at one time and find the best rates. Plus, with a minimum credit score of 575, the company is open to a wider range of borrowers than many lenders. Once you enter your information, you can get an instant offer and wait for more offers from lenders in myAutoloan’s network to come in. This lets you easily compare a few loan options to find the best one for you.

Keep reading: myAutoloan review

Consumers Credit Union: Most Flexible Terms

If you have a decent credit score, Consumers Credit Union may be your best option. With a minimum credit score of 640, members can expect to get auto loans with no minimum or maximum amount. Members also get access to the company’s mechanical repair coverage with 24-hour emergency service. The flexibility for those who meet the requirements to be granted membership to Consumers Credit Union is one of the top reasons why we rate the company so well.

Keep reading: Consumers Credit Union review

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best auto loan companies. We collected data on dozens of loan providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the companies that scored the most points topping the list.

In this article, we selected companies with high overall ratings and cost ratings. The cost ratings were informed by starting APR and loan amounts.

*Data accurate at time of publication.