December is one of the biggest months for car buying, and something buyers may notice when shopping are longer terms on loans.
“84 months, or seven year auto loans are not uncommon,” says Matt Jones from Edmunds.com.
Jones says terms on loans have gotten longer because sticker prices have gotten higher.
“What we’re seeing is, people are focused on their monthly payment and their monthly payment is what drives a lot of buying decisions,” he notes.
While it’s true that longer term loans mean lower payments, they also mean higher costs.
“Even if the payment is lower, you could end up paying thousands over the term,” Jones explains, “So you really have to look at the total cost of ownership.”
One important consideration is how long you plan to hold onto the car.
“I don’t think there’s anything inherently wrong with a 72 month loan if the rates are low,” Jones says. “Especially if someone says ‘This is the car I am going to buy, I’m going to drive it till the wheels fall off’.”