How Long Is the Average Car Loan?

by Ryan Cockerham ; Updated December 07, 2018
Most car buyers end up with a 60-month or longer car loan.

Buying a new automobile can be an exciting opportunity in our life. The prospect of gaining a valuable asset such as a car can help you expand both your professional and personal opportunities. For many individuals, car loans are an essential resource that provide critical funding for this purchase. Although cars are not nearly as expensive as other significant purchases such as a home, they do continue to represent a significant financial investment. Depending upon your specific financial circumstances, your monthly installments on your car loan may fall close to the average car payment made by many Americans today. A variety of factors, including your credit history and the size of our down payment will affect the length of your car loan.

Tips

  • The average length of a car loan today is between 68 and 72 months. A variety of factors, including credit history and down payment size, will affect the terms of borrowing dramatically.

Exploring Average Car Loan Length

As mentioned previously, your financial history will greatly impact the terms under which a car loan is offered to you. While your credit score and other pertinent factors will not directly affect the length of your loan, they will influence the interest rate you pay on the principal borrowed. This, in turn, will likely influence the length of the loan accepted by new car buyers. Generally speaking, the average car loan length today is between 68 and 72 months. Regardless of the price of the vehicle in question, the majority of car buyers are opting to repay their balance over a period of five years.

Alternatives to Average Car Payment Lengths

If the prospect of paying for your car over a period of 72 months does not fall in line with our expectations, you will likely be able to either stretch out or shorten this repayment period. As a standard rule, the size of your down payment will dramatically influence how you select your repayment terms. This is due to the fact that a smaller down payment will result in a larger principal balance and, consequently, a larger amount of interest paid at regular intervals on the car loan. Although your monthly payments may be reduced by paying for your car over a longer period, this also means you will be paying the largest amount of interest over the length of the loan compared to those individuals who either placed a larger down payment on their car or opted to pay off the balance at a faster rate.

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Your Loan and the Average Cost of a Car

If the prospect of paying back your car loan seems daunting, it is also possible that you overspent on the particular car you purchased. The average transaction price of a new car purchased today is over $36,000. It may be worth your time to explore where your car purchase fits relative to this average, although you should keep in mind that these figures do not take into account the amount of interest paid on the principal of a car loan. Even though the prospect of stretching out your car purchase over 72 months may provide attractively low monthly payments, the amount of interest paid on this loan may surprise you, particularly if you are unable to secure an attractive APR rate on the purchase itself.

If you are looking for more information about car financing options, it is worth your time and effort to speak with a dealer representative in order to learn what additional payment strategies may be available.

About the Author

Ryan Cockerham is a nationally recognized author specializing in all things innovation, business and creativity. His work has served the business, nonprofit and political community. Ryan's work has been featured at Zacks Investment Research, SFGate Home Guides, Bloomberg, HuffPost and more.

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