Things to Know About 10-year Car Loans

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - December 12, 2018

The average car loan term in 2018 is around 72 months – six years. Some lenders and credit unions, however, offer extended loan terms of anywhere from 96 months (eight years) to 120 months (10 years). Although the lower monthly payment may seem attractive, a decade-long auto loan could leave you paying for a vehicle that’s worth very little 10 years from now.

5 Reasons to Say No to Long-Term Auto Loans

There are more cons than pros to taking out a longer auto loan. It may feel like a deal with that low monthly payment, but there are five big reasons why you should stick to a loan term that doesn’t exceed 96 months:

  1. Immediately upside down – You don’t want to have too much negative equity, another way of saying the car’s actual cash value is less than the loan balance. Generally, the longer the loan term, the longer you have negative equity. If you extend your loan term to the 96- or 120-month range, you could end up in a negative equity cycle that’s nearly impossible to get out of.
  2. More interest – Your total interest charges increase with a longer loan term and add up fast. You could end up paying much more for your vehicle than expected because of the additional interest charges associated with longer loan terms.
  3. Higher interest rates – In addition, longer loan terms tend to come with higher interest rates. Once the loan term goes beyond 60 months, you can expect an increase in your interest rate.
  4. More repairs – Cars kept longer tend to need more repairs while they’re being financed. Depending on the vehicle’s condition when you bought it, if you keep a car past the average six-year loan term, you could end up paying more while it’s being financed just to keep it running.
  5. Most lenders don’t offer long loan terms – Where and how you can get a long auto loan term can be a challenge on its own. Many lenders don’t offer loan terms past 72 months, but some smaller institutions (such as credit unions) may offer 10-year loans.

Ways to Get Around a Long Loan Term

If you’re looking to save money on a vehicle you really want, but the only option for you is a really long loan term, there are four ways you can avoid that long term while keeping the payment affordable:

  1. Lease instead of buy – If your credit allows, you could lease the car instead of buying it. Although you don’t get the satisfaction of owning the vehicle, a cheap lease deal could keep your monthly payments low and you could save yourself thousands of dollars.
  2. Utilize low APRs – If you’re adamant about taking on a longer loan term, you should only do so if you qualify for zero or low APR deals. This way, you avoid high interest charges.
  3. Pay off the loan early – If you do take on a long loan term, and realize you don’t want to keep paying for the car, you can make additional payments and pay the off loan earlier. Before doing this, make sure there’s no prepayment penalty (most auto loans don’t have one).
  4. Make a larger down payment – To offset being upside down on a longer term loan, you can make a sizeable down payment. Any amount helps, but the bigger the better. Ideally, you should put down at least 20 percent.

Feeling Lost in the Car Buying Process?

The bottom line is this: try and keep your loan term as short as possible. The size of your monthly payment is a small part of a loan, and when deciding how long you want to finance a vehicle, you should look at the big picture. At the same time, if you’re stuck in the car buying process and aren’t sure where to start looking for financing, let CarsDirect help.

We work with a network of special finance dealerships that have the lending resources available to help you get the financing you need. Forget about the stress of going from dealer to dealer and being turned down. Simply fill out our free and easy auto loan request form and we'll get to work matching you with a dealership in your area!

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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