There’s a lot of talk about the pros and cons of getting a car loan. But what many people don’t realize is that there are actually two types of loans to choose from: 60- and 72-month loans. If you’re wondering which one is better for you, read on.
Interest rates
On a 60-month loan, interest rates are usually lower and payments are smaller. You’ll pay less in interest over time because you’ll be paying on the loan for a shorter period of time.
On a 72-month loan, interest rates are usually higher and payments are larger. You’ll pay more in interest over time because you’re paying for three years longer than someone who went with the 60-month option!
Loan terms
A 60-month car loan will be more affordable than a 72-month car loan. This is because they are the same price, but you pay less interest with a 60-month loan. You can also afford to buy a nicer car if you take out the longer loan, because it takes you longer to pay back your balance.
However, this doesn’t mean that everyone should always choose shorter terms over longer ones. For example, if you want to buy a used car and are only driving it for three years before selling it again at auction or trading up for something newer—a 60-month term might actually save money on interest costs in this scenario!
According to financial advisors like Lantern by SoFi,“The average car loan length for new vehicles in the first quarter of 2022 stood at 69.48 months, or nearly six years.”
Affordability
Car loans are typically for 60 months, but sometimes you can get a 72-month loan. The longer the loan term, the more you pay in interest over time. However, there are some things to consider that may make a 72-month car loan better than a 60-month car loan.
A shorter car loan term means you’ll be paying more in interest overall because your monthly payments will be higher and they’ll start sooner. This could add up to thousands of dollars if your vehicle lasts less than five years—and even more, if it’s only useful for four years or fewer!
On top of all this, there are additional costs associated with owning a vehicle that go beyond just buying and driving it. If you’re looking at both sides of the equation as well as considering potential savings from choosing either option then here’s how each one stacks up.
Money in your pocket
If you have the option to choose a longer car loan, then you should do it. The longer your car loan, the more money you will save. A 60-month term will cost less than a 72-month term because there are no finance charges for 60 months and only one finance charge for 72 months.
A longer loan term allows you to pay less in interest over time because there’s more time for compounding on any interest rate discounts or reductions applied during repayment of your debt balance plus principal owed during that period; the result is lower monthly payments overall.
The bottom line is that there are many factors to consider when deciding between a 60-month and 72-month car loan. If you’re on the fence about which length of time is better for your situation, it might be a good idea to speak with a local lender and get their opinion on which one works best for your financial needs and circumstances.
