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Complete Guide to 120-Month Auto Loans in 2022

120-month auto loans are vehicle loans with a repayment period of 10 years. These loans are rare and usually only offered by credit unions or specialized lenders for higher-priced vehicles.

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10-year loans are a relatively new way to finance the car of your dreams. But how do they work, and are they worth it?

Some experts will tell you a 120-month auto loan is a bad idea. This post also tells you that, but we’ll actually tell you why a 120-month loan is a dangerous choice, complete with all the vocabulary you need to understand the components of the investment.

If you’re a newbie to auto finance, this is your complete one-stop shop to being able to keep up with your car-mogul-slash-enthusiast Uncle Jerry at all the holiday dinners this year.

What is a 120-Month Auto Loan?

A 120-month auto loan is an auto loan with a 10-year repayment. If you make your regular payments (no more and no less) every month, you’ll own your car debt-free after 10 years. Sounds okay in theory, right?

But before you agree to finance your car over a 10-year period, you have to account for a higher interest rate and the dangers of depreciation (the decline in your car’s value over time) and negative equity (when your loan amount exceeds the value of your car). 

Is the 120-month auto loan still worth it? Check out the real-world scenario below to see how a longer auto loan term will impact your monthly payments and interest.

Real-world scenario: 120-month auto loan vs. 72-month auto loan

Say you want to buy a 1969 Ford Mustang that costs $125,000.

You’ve saved up $25,000 for a 20% down payment.

You’re trying to decide between a 72-month auto loan and a loan with a 120-month term. 

The 72-month loan has a 5% interest rate and monthly payments of $1,610. Over the life of the loan, you’ll pay $15,955 in interest charges.

The 120-month loan comes with a 7% interest rate and monthly payments of $1,161. However, because you’re borrowing money for longer and at a higher interest rate, you’ll end up paying $39,330 in interest by the time the car is paid off.

Can you afford the higher monthly payments in order to save on overall interest and pay the car off sooner? Or do you prefer to have a more manageable monthly payment at the expense of a higher interest rate? These are some of the questions you should ask yourself when considering a 120-month auto loan.

Another important factor to consider that you won’t find in your loan agreement is inflation. Inflation is the natural increase in prices, which weakens the value of the dollar.

Inflation is the reason a new Ford Mustang retailed for around $2,500 in 1960, but by 2020, the latest Mustang models were asking over $26,000. Inflation can move up or down, and it doesn’t move in a straight line. 

Here’s how inflation could impact the new sale price of a $125,000 car over 10 years.

YearProjected Price

By year 10 the same 120-month loan at 7% interest and a 20% down payment for an equivalent car (based on 10 years of inflation price of $163,096) would amount to a monthly payment of $1515.

$1161 / $1515 = 77% of the payment for an equivalent car in 10 years

$1161 x 77% = $890 – What it would feel like you are paying 10 years from now

Although the interest rate of 7% is higher, the annual average inflation rate of 3% will have more time to eat away at the loan’s interest rate with the longer 10-year term. A monthly payment of $1161 ten years from now would feel a lot like paying $890/month now for this reason.

Think about the interest charges you’ll pay today relative to the increased cost of buying a car and the monthly payments associated with the purchase in the future, and ask yourself which one makes more sense for you. 

Whether or not the car you purchase will lose, hold, or appreciate in value may also be a deciding factor.

What Do You Need to Qualify for a 120-Month Auto Loan?

Credit score concept. Document with personal credit history. Idea of finance and banking. Chart with rating from bad to excellent. Isolated flat vector illustration

The first thing to do is check your credit. If you’re applying for a 120-month loan to finance a classic, exotic, or collectible car, lenders will typically look for a credit score of 740+.

Lenders will often also ask for proof of income (like pay stubs or, if you’re self-employed, tax returns and bank statements) in addition to examining your debt-to-income ratio (how much money you owe relative to how much money you make).

Basically, lenders want to see that you have the money to pay back your loan and that you have an excellent history of paying all your debts on time.

Which Lenders Offer 120-Month Auto Loans?

While most big lenders don’t offer auto loans spanning 120 months, there are several credit unions and smaller lenders throughout the U.S. that do give you the option of financing a car over 10 years.

    1. LOC Credit Union
    2. Advanz
    3. United Bay Community Credit Union
    4. Americo Federal Credit Union
    5. PSECU
    6. DCU
    7. Woodside Credit
    8. Eastman Credit Union
    9. Yolo Federal Credit Union
    10. LightStream

    Why Do Lenders Offer 120-Month Auto Loans?

    Lenders offer 120-month auto loans both for their own benefit and for the benefit of lenders seeking longer terms when financing a car.

    1. It’s an opportunity for lenders to make more money by collecting more interest payments, which you can see in the above example comparing 72-month and 120-month terms.
    1. Cars are much more expensive than they used to be, and spreading out payments over a 10-year period reduces the amount of money you pay each month, making a car more affordable in the short term.  

    In 1990, the average new car cost around $15,500, and the median household income was around $30,000. In 2021, the median household income was around $70,000, while the average price of a new car was $47,000.

    When does a 120-month loan make sense?

    Let’s walk through the pros and cons of a 10-year auto loan.

    If you get an incredibly low interest rate on a 120-month auto loan, it may make sense to take advantage of the low rates so you can put your money to work elsewhere. If inflation is high and you think the same car will cost significantly more in the future, you might decide it’s worthwhile to purchase the vehicle today because the interest charges are lower than the rate of inflation.

    Lower monthly paymentsA higher interest rate and paying more overall interest
    It can help you buy a more expensive carWarranties often only last 3–5 years, so you could be stuck with payments and pricey repairs
    It can help you free up money to spend or invest elsewhereThe car’s value may depreciate to the point where it’s worth less than what you owe on the loan
    You can refinance to a shorter loan term later if you change your mindIt will take a long time to own the car outright
    Allows you to lock in an interest rate for a long period of time

    Is a 120-Month Auto Loan Right Choice for You?

    120-month auto loans – like 144-month auto loans – are typically marketed as a way to finance classic, exotic, or collectible cars. People who buy these types of cars tend to be collectors who keep cars for a long time, if not for life. It’s a collector’s item and a car you’re probably not going to beat into the ground with daily driving or heavy-duty trips. It’s not your main vehicle and it’s not meant to be. 

    People also consider these loans for high-end cars that are not considered classics, collectibles, or antiques. If you’re planning on taking really good care of the car and using it for the next 20–30 years, maybe a 120-month auto loan is worth it for you. But even then, try and invest in a reliable car that will serve you well with minimal maintenance. Keep in mind that some loan providers will have minimum loan amounts(such as $100,000) so if you’re looking to buy a $30,000 car, a 120-month term won’t be the right match.

    Finally, you should know when to expect a major breakdown expense on that vehicle. Are these cars known for a major breakdown after a certain number of miles? Do the research on the car itself before you look into loan options, and definitely make sure to do all your research before you go ahead with buying and financing the vehicle.


    What is the longest term for an auto loan?

    For most auto loans, the longest term available will be 84 or 96 months. However, some companies that specialize in auto loans for exotic cars may offer auto loans for 120, 144, or even as many as 180 months

    Why are interest rates higher on longer auto loans?

    Lenders consider longer auto loan terms to be riskier because it takes them longer to recoup their initial investment. To compensate for the added risk, lenders will charge a higher interest rate to make the loan worth their while.

    What is considered a good interest rate on an auto loan?

    A good interest rate on an auto loan varies based on the economy and broader interest rates, as well as the loan length, your credit, and debt-to-income ratio. Historically, many people would consider an auto loan interest rate under 5% to be good.

    Are longer or shorter auto loans better?

    If you’re looking for a lower interest rate and want to own your car outright earlier, a shorter auto loan will be your best option. If you want to take advantage of lower monthly payments and don’t mind paying more interest over the life of the loan, a longer loan term will be a good fit.

    How long should I keep my car?

    The length of time you should keep your car depends on your personal preferences and the car’s condition. If your car is running smoothly, keeping it for as long as possible (provided it doesn’t need constant repairs) will likely be the best financial choice.

    Can you pay off a 120-month auto loan early?

    You can pay off a 120-month auto loan early by paying more toward your car loan than the minimum amount you owe each month. Paying off your car loan early can even save you on interest charges.

    How much should I put down when buying a car?

    When buying a car, putting down 20% is ideal for helping you get the best interest rate, keeping your monthly payments affordable, and avoiding negative equity. If you can’t afford to put down 20%, aim for at least a 10% down payment.

    Are 120-Month Auto Loans Worth It?

    With all said and done, let’s go back to the original question: is it worth it to sign up for a 10-year auto loan?

    Well, it depends on your financial situation, goals, and most importantly, whether the car of your dreams today will be the car of your dreams 10 years from now.

    As an investment, cars tend to lose value over time, and while there are a few rare exceptions, don’t count on your purchase of an exotic, classic, collectible, or antique vehicle to appreciate in value.
    However, if you can afford to buy that perfect car, understand the costs and the risks, and are confident you’ll still love the car many years from now, a 120-month auto loan might be a good option for you.

    The Top Alternatives to 120-Month Auto Loans:

    If you decide a 120-month auto loan isn’t right for you, that’s perfectly fine. Whether it’s the increased cost of interest or the idea of having 10 straight years of car payments on the same vehicle, there are plenty of other ways to buy a car. Here are 5 other ways you can pay for a car: 

    • Vehicle loans with shorter terms (these usually range from 24 months–96 months)
    • Cash (this doesn’t necessarily mean actual bills, but can also include checks and wire transfers)
    • Personal loans
    • Credit cards

    If you own your home, a home equity loan or home equity line of credit may be an option (speak to a licensed mortgage lender to learn more about these types of loans).


    Maya Workowski

    Maya W is a copywriter. She has worked in the editorial and copywriting space for multiple years and loves getting creative with the vision for her projects. Her highlights include co-founding FEM&M magazine, an intersectional feminist publication, and receiving honors for her original Creative Writing thesis from Franklin & Marshall College.

    We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


    About the Author

    Maya Workowski

    Maya Workowski

    Maya W is a copywriter. She has worked in the editorial and copywriting space for multiple years and loves getting creative with the vision for her projects. Her highlights include co-founding FEM&M magazine, an intersectional feminist publication, and receiving honors for her original Creative Writing thesis from Franklin & Marshall College.

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