How Long Should Your Auto Loan Be?

How shorter loans will save you money in the long run

If you’re looking to buy a new car, AutoCosts_Featuredyou might be planning to use an auto loan to finance your new purchase. When obtaining a car loan, most buyers tend to focus solely on the purchase price, and not consider the overall conditions of the loan. But the car loan length can be just as important as the number value you’ll pay. And if that’s the case, you’ll need to consider a few things beforehand — like whether to obtain a short- or long-term loan.

While the average car loan length is 67 months, many experts agree that it may be more beneficial to go for a shorter auto loan. So is there a magic number that experts can agree on? All signs point to 36 months being a pretty perfect amount of time for an auto loan.

“If you really care about building financial security, you would never take out a car loan greater than 36 months,” says Suze Orman, host of The Suze Orman Show. “Do that and you’ll have more money to put toward the spending that really matters, such as building an emergency savings account that covers eight months of expenses, putting more money into your retirement savings accounts, and being able to qualify for a mortgage if owning a home is a priority.”

Basically, a shorter car loan, or one that is over the course of 36 months, will save you money in the long run. Think about it: While a long-term loan will offer you a lower monthly payment, you’re paying much more in interest. There are not many benefits to a long-term loan. It’s important to understand that the length of your loan directly affects your interest rate.

“A shorter-term loan pays off the car faster and helps you pay less in overall interest costs,” explains Allison Vail, a spokeswoman for

Longer loans are usually coupled with high interest rates, meaning that by the time the car is paid off, the vehicle’s life expectancy is usually at its end too. Note that the average car’s life is 9.4 years (7.6 years for trucks).

In addition, if you have a long-term car loan, but want to trade your car in early (as many do with a depreciating car value), you could have negative financial consequences.

“If you have a 72-month loan and get the itch to buy a new car around the average six-year mark, you wouldn’t have enjoyed any time without payments, which diminishes the point of car buying in the first place,” explains Ronald Montoya, consumer advice editor with “At that point, you’re better off leasing the car.”

“If you have to finance something for over 60 months, you shouldn’t be buying a car, or you should be getting into something cheaper,” adds John Ulzheimer, president of Consumer Education for

When deciding on getting a short- or long-term car loan, weigh the pros and cons to find out which would work best for you.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

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