Car Loan Terms: How to Choose Between 36 and 84 Months

In short

Car loans commonly run from 36 to 84 months. In the second quarter of 2026 the average term was about 69.5 months for new cars and 67.9 months for used ones, according to Experian. Each extra year lowers the monthly payment but adds interest and keeps you owing more than the car is worth for longer, which hurts if you need to sell, trade in or the car is totaled. Pick the shortest term whose payment fits your budget with room to spare.

Common range: 36 to 84 months
Average new-car term: 69.5 months
Average used-car term: 67.9 months
$35,000 at 7%, 84 vs 48: $4,142.40 more interest

What the term changes

The term is the number of monthly payments. It does not change the price of the car, but it changes three things you will feel: the size of each payment, the total interest, and how quickly you build equity, the gap between what the car is worth and what you still owe.

Payment: spreading the same balance over more months makes each payment smaller.
Interest: you pay interest on the remaining balance every month, so a balance that falls slowly costs more in total.
Equity: a car loses value from the day you drive it away. A long loan pays the balance down slowly, so the balance can stay above the car's value for years.

The rate can depend on the term as well. The FTC warns that longer loans can carry higher rates, but it is not automatic: in the Federal Reserve's data for the second quarter of 2026, commercial banks averaged 7.14% on 60-month new-car loans and 6.97% on 72-month loans. Ask each lender for a quote at two or three terms.

Worked example: one loan, five terms

Here is a $35,000 loan at 7% APR at each common term. The rate is held the same so that only the term changes. Payments are rounded to the cent; total interest is the payments added up minus the amount borrowed, so it is approximate by a few cents.

$35,000 borrowed at 7% APR: payment, interest and balance after 3 years by term
Term	Monthly payment	Total interest	Owed after 36 payments
36 months	$1,080.70	$3,905.20	$0 (paid off)
48 months	$838.12	$5,229.76	$9,686.24
60 months	$693.04	$6,582.40	$15,479.16
72 months	$596.72	$7,963.84	$19,325.50
84 months	$528.24	$9,372.16	$22,059.57

Going from 48 to 84 months cuts the payment by $309.88 but adds $4,142.40 in interest. The last column matters just as much: after three years of an 84-month loan you still owe about $22,060. Whether that is more than the car is worth depends on the model and its mileage, so look up what similar three-year-old cars sell for before you commit. Compare your own numbers side by side in the loan term comparison.

Why long terms lead to negative equity

Owing more than the car is worth is called negative equity, or being upside down. It does not cost you anything while you keep the car and keep paying. It costs you when something forces a change.

Trading in early

The dealer pays off the old loan, and the shortfall is often added to the new one, so you start the next loan further behind. See trade-ins and negative equity.

A total loss

Insurance pays the car's value, not your balance. Without GAP coverage, you owe the difference on a car you no longer have.

Selling privately

You must pay the lender in full to release the title, so you need cash to cover the gap.

Falling behind

If the car is repossessed and sold for less than you owe, you can be left with a deficiency. See upside-down car loans.

Long loans also carry more risk of falling behind. In a 2017 report, the Consumer Financial Protection Bureau found that 42% of auto loans made in the year studied ran six years or longer, up from 26% in 2009. People who took those loans had average credit scores 39 points lower than people on five-year loans, and the longer loans had default rates above 8%, about twice the rate of shorter ones. The CFPB's consumer guide adds that some financial advisers recommend keeping car loans to five years or less.

How to pick a term

Start from the budget, not the car. Decide the payment you can carry along with insurance, fuel and repairs.
Price the car at a short term first. If the payment only fits at 72 or 84 months, consider a cheaper car or a larger down payment.
Ask for quotes at several terms. Compare APR, total interest and the balance you would owe in two or three years.
Match the term to how long you will keep the car. If you trade in every four years, a seven-year loan makes it likely you will still owe more than the car is worth at trade-in time.
Check for prepayment terms. Paying extra toward principal shortens a loan; confirm the contract allows it without a penalty.

When a longer term can make sense

A longer term is not always a mistake. If a lender offers a low promotional rate at 72 months, you plan to keep the car well past the loan, and you put enough money down that the balance stays below the car's value, the lower payment may be worth it. You can also take the longer term and pay extra each month, which keeps the lower required payment as a safety net. The risk returns if the extra payments stop.

The next chapter covers the other lever that changes your payment and your equity: how much to put down.

Questions people ask

What is the most common car loan term?

In mid-2026 the average was about 69.5 months for new cars and 67.9 months for used cars, according to Experian, so terms of 60 to 72 months are typical.

Is an 84-month car loan a bad idea?

It is expensive. On $35,000 at 7%, 84 months costs about $9,372 in interest against $5,230 at 48 months, and you owe more than many cars are worth for years.

Can I pay off a long car loan early?

Check the contract for a prepayment penalty first. If there is none, extra payments applied to principal shorten the loan and cut the interest; ask the lender how to send them.

Do longer car loans have higher interest rates?

Often, but not always. Ask each lender for quotes at several terms and compare the APR and total interest.

Sources

Facts on this page were checked against these sources on October 26, 2026. The worked example uses one rate for every term so that only the term changes.

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