Long-Term Car Loans; What's Right For You

Veronica Viveros was on the hunt for a new car. The make and model of the car, however, were not her only decisions.

Due to her tight budget, Viveros also has to decide on the length of her loan.

"I am expecting and we do have a lot of bills and finances. So, I'm looking at about $300 to about $350 a month" Viveros said. "That would help out so much."

Viveros is considering a long term car loan. So, if she buys a $23,000 car and wants to keep her payments to $350 a month, she needs a 72-month loan. Which means her new baby will be 6-years old by the time she pays that car off.

The idea behind longer car loans is it stretches payments out.

"The consumer that's opting for a $25,000 new car loan can save around $200 per month by opting for a 72-month loan as opposed to a 48-month loan," says Alec Gutierrez, Senior Analyst for Kelley Blue Book.

Lowering monthly car payments may be cheaper, but it also could be very risky down the road.

"The longer you extend your term, the longer it's going to take you to get out of a negative-equity position. So, consumers that take a longer term find themselves at greater risk of being under water for a longer period of time," Gutierrez said.

While paying off a long term loan you could have a car accident or need major repairs. Experts say that can lower the car's value, putting people with long-term loans into a financial bind. Also, more people are sticking with the same set of wheels.

"The trend in the last 10 years is people have kept their cars longer," says Steve Forest, General Manager of O'Hare Auto Group," The cars have been built better."

However, experts say not all long-term loans are bad.

"A general rule of thumb is that consumers should try and keep their monthly payments within 20 percent of their gross income. So, if that means you have to opt for a five- or six-year loan, that generally makes sense."

Something experts don't recommend is a 96-month loan. Whatever you decide to do, experts say it's important that you know how much you can spend on a car. Viveros is leaning towards a 6-year car loan. She says that way her car expenses can take a back seat to the money she needs for her growing family.

"It would work out great for me," Viveros said.

Experts also say that if you do go with a 72-month loan, you'll pay more because of higher interest rates. You can check out loan rates before you start car shopping, here are websites where you can check out costs: or