How many years is best to finance a car?

Asked by: Prof. Rolando Marquardt  |  Last update: July 28, 2025
Score: 4.9/5 (67 votes)

Maximum auto loan terms: What's recommended? Even though the majority of car buyers are going with long-term car loans, is an auto loan of 84 months or more a good idea for you? NerdWallet recommends financing new cars for no more than 60 months and used cars for no more than 36 months.

What is the best length of time to finance a car?

In short, three to five years is usually the best amount of time for a car loan. This range strikes a good mix between manageable payments and low interest rates and risks of depreciation. You should think about your income, interest rates, and how long you plan to keep the car before picking a loan term.

How much is a $30,000 car payment for 60 months?

How much would a $30,000 car cost per month? This all depends on the sales tax, the down payment, the interest rate and the length of the loan. But just as a ballpark estimate, assuming $3,000 down, an interest rate of 5.8% and a 60-month loan, the monthly payment would be about $520.

Is it smart to finance a car for 7 years?

Long loan terms (7 years) might seem like a good deal, but they cost more in interest and can set you up for other financial problems, like owing more than your car is worth.

What is the 20/4-10 rule for buying a car?

20% down — be able to pay 20% or more of the total purchase price up front. 4-year loan — be able to pay off the balance in 48 months or fewer. 10% of your income — your total monthly auto costs (including insurance, gas, maintenance, and car payments) should be 10% or less of your monthly income.

Why You Should Finance Your Car (And Not Pay Cash)

44 related questions found

What's a good down payment on a 30k car?

As a general rule, you should pay 20 percent of the price of the vehicle as a down payment. That's because vehicles lose value, or depreciate, rapidly.

What is the golden rule of buying a car?

Following the 20/4/10 rule has long been a good rule of thumb for buying a new car. The idea is you can comfortably pay off a car loan if you put more than 20% down, your loan term is around 4 years, and your car payment plus insurance and maintenance costs are 10% of your monthly income.

Is 75 months too long for a car loan?

Auto loans usually range from 36 to 60 months, but if you want the longest car loan, you may be able to get 72-month or 84-month terms. A repayment period that long (up to seven years) means lower payments, making a long-term car loan easier on your budget.

How many years of car loan is best?

However, if the burden of monthly EMI that short-term loans get problematic, choosing a long-term, anytime within 7 years would be wise. The monthly pay out would be reduced compared to short-term loans.

How to pay off a 7 year car loan in 3 years?

If you want to pay off your loan early, here are six ways to make it happen:
  1. Refinance your car loan. ...
  2. Make biweekly payments. ...
  3. Round up your payments. ...
  4. Put extra money toward a lump-sum payment. ...
  5. Continue making your monthly payments. ...
  6. Opt out of any unneeded add-ons.

How much should my car payment be if I make $60000 a year?

A person making $60,000 per year can afford about a $40,000 car based on calculating 15% of their monthly take-home pay and a 20% down payment on the car of $7,900. However, every person's finances are different and you might find that a car payment of approximately $600 per month is not affordable for you.

What is 6% interest on a $30,000 loan?

For example, the interest on a $30,000, 36-month loan at 6% is $2,856. The same loan ($30,000 at 6%) paid back over 72 months would cost $5,797 in interest. Even small changes in your rate can impact how much total interest amount you pay overall.

Should you tell the dealer the maximum you can pay per month?

Do not tell the dealer what you are hoping to make in monthly payments—focus only on the bottom-line cost. Also, negotiate any other aspects, such as the trade-in value and add-ons you actually want, separately from the purchase price. Only in this way can you know for sure what you are paying for the car.

What is a negative of having a 36 month car loan?

Pay More in Interest

Lenders consider long-term loans riskier and consequently charge higher interest rates for them. You'll also spend more time paying down interest at the start of the loan before reducing the principal, adding to your loan's overall cost.

Why should you not finance a car for more than 4 years?

Lenders usually charge higher interest rates for long-term auto loans. Because there's more time for a borrower to default on the loan, lenders consider longer-term loans to be a higher risk. To compensate for that risk, they often charge a higher interest rate when you stretch out the loan term.

What is the longest you should finance a car?

But the reality is, given how expensive new and used cars are today, this rule is not only ignored but also outdated. This is why Edmunds recommends a 60-month auto loan if you can manage it. A longer loan may have a more palatable monthly payment, but it comes with a number of drawbacks, as we'll discuss later.

Will car loans go down in 2024?

According to Edmunds, the average new vehicle loan rate dropped to 6.6% in December 2024, down from a high of 7.6% in October 2023. Used-vehicle loan rates also declined, falling to 10.8% from 11.9% earlier in 2024.

How much is a $20,000 car payment per month?

Payments would be around $377 per month. According to the results, it will take you 60 months, an interest rate of 5% of $2,645, to fully pay your $20,000 car loan. However, the monthly cost of a $20,000 car loan will depend on your repayment period and the annual percentage rate (APR).

Is it smart to do a 72-month car loan?

Pros: Lower monthly payments: Many choose a 72-month loan because the monthly payments are lower. Borrowers can get a more expensive car and still stay within their budget. Opportunity costs: Borrowers could avoid choosing a more expensive car and use the difference in payments a different way.

What is a bad car payment?

According to experts, a car payment is too high if the car payment is more than 30% of your total income.

Is $2000 a good down payment on a car?

How much should you put down on a car? A down payment between 10 to 20 percent of the vehicle price is the general recommendation.

How much should I spend on a car if I make $60,000?

If your gross salary is $60,000, your take-home monthly pay is probably around $3750, assuming about 25 percent of your pay goes toward taxes and other expenses. Based on a calculation of spending 10–15 percent of your monthly pay on a car loan, you should spend no more than $562.50 on your monthly car payment.

What is the 40 30 20 10 rule?

The 40/30/20/10 rule is a budgeting framework that separates what you earn into categories for spending your after-tax income: 40% for needs. The biggest category for most people is day-to-day needs. This includes housing, utilities, transportation, health care and groceries.