72-Month Auto Loans: Advantages, Disadvantages and How to Get the Best Rates

• Posted on Autos.com Editor
• in Auto Loans
• on October 7, 2013

Getting a 72-month auto loan has both its benefits, as well as its downfalls. On one hand, you can get lower monthly payments. On the other hand, you will be paying more in the long run for these loans. Most long term car loans are typically 36 to 48 months, with some being as long as 60 months. 72 month loans are fairly new and have been attractive to prospective buyers. It is imperative you understand the advantages and disadvantages to this type of loan.

It may even be possible to find an 84 month loan or even a 120 month loan. The following information can be used in order to help you decide if a 72-month term is right for you.

Advantages

The biggest advantage for 72-month car loans is that the monthly payments are reduced. This is because you are taking more time to pay for your car. Doing it this way enables you to perhaps buy a more expensive car since the payments will be more reasonable.

Maybe you just need a car, but are not in a great financial position at the moment and expect to be a little better off later. You can lower your payments in the meantime, and then as you progress, possibly pay more off quicker.

Another advantage to a longer car loan is that you can refinance your loan after a few years. Since longer loans increase the interest, you can refinance in a few years to shorten the time, and more importantly, decrease the APR interest rate.

Disadvantages

The biggest disadvantage for a 72-month car loan would be that the interest rates are much higher for these longer loans. When you see companies offering 0% APR, or even small numbers like 1-5 percent, those are typically 36 or 48 month loans. The longer the loan means the longer it will take the finance company to get its money back. Because of this, they raise the interest rate. You can be paying double, or even more than what someone is paying for a 36 or 48 month loan.

Coupled with the higher interest rate, is the sheer amount you will pay in interest. Since you are paying interest for a longer period of time, it is obvious you will pay more in interest than on a shorter loan. You will end up paying much more for the car in the long run than if you had a shorter loan. It may be in your best interest to keep your monthly payments low, but that does not mean you are saving money. The longer the loan, the more you will lose to interest.

Another disadvantage is that cars depreciate very quickly. Most people don’t use their cars for over six years, so it is likely you will trade in your vehicle. Because of the longer payments, you may still owe money on your car. If this is the case, it is within the realm of possibility that you actually owe money, even after you trade in your vehicle. This will leave you in what is called negative equity, and you don’t want to be there. If your vehicle isn’t worth what you are paying, it is a poor financial decision.

Tips for Getting the Best Rate

If you are in the market for a new car, but you can’t really afford to pay it off in a year or two, you might want to consider a 72-month auto loan. However, six years is a long time to make payments on a vehicle, and odds are, you’ll still be paying on the car long after the factory warranty expires. As the loan term progresses, your vehicle, through ordinary wear and tear, will probably need repairs – which can get pretty expensive. If you’ve considered all your car loan options, and you still want the extended payment term provided by a 72-month loan, you should try to get the most auto loan value for your dollar.

Members of credit unions are at a distinct advantage when it comes to these long-term auto loans. Credit unions are known to provide some of the best car loan rates available. If you don’t belong to a credit union, you should consider joining one. Almost everyone is eligible to join some type of credit union, so check out a few in your area and find one that suits your needs.

If you have great credit, you may be eligible for a 72-month auto loan from the auto maker’s in-house finance company. These companies are a division of the manufacturer itself, and they’re otherwise known as captive finance companies. Most of the major automakers (Ford and GM, for example) have their own lending companies, and they offer the best car loan rates for those whose credit is good.

Recently, the major automakers have been offering 0% financing, which isn’t usually available with a 72-month term. However, when the dealer is advertising that kind of special, their six-year loans will come with a low interest rate as well.

Similarly, those with good credit should give an online lender a try. There are companies, such as Lending Tree, that make it easy to apply for an auto loan in minutes. If you tell them you’re looking for a six-year term, they’ll match you up with local lenders who can help.

Some lenders are reluctant to offer a 72-month car loan, because they believe that the car’s ordinary wear and tear will prevent the borrower from fulfilling their obligation. No one wants to keep paying on a beaten-up car, so if you’re approved for a 72-month auto loan, take good care of the vehicle.

No matter how you find a 72-month car loan – through a local lender such as a bank or credit union, through an in-house financing company or through an online lender – a bit of research and some patience will go a long way toward getting you the long-term loan you need. 72-month auto loans aren’t for everyone, but if you need a reliable new car and you can’t afford the rates that come with shorter-duration loans, they are definitely worth looking into.