When you shop for a new or used vehicle, you’ll also need to consider auto loans. Few people have the cash to purchase a vehicle outright without financing, so shopping for the best auto loan rates and terms is part of your research. Many options are available, from traditional banks and credit unions to dealership financing or the online marketplace for vehicle loans. Let’s examine the best auto loan rates on financing for 72 months on a new or used vehicle.
What Is a Vehicle Loan?
You can borrow the money from a lending institution if you don’t have the financial resources to pay cash for a new or used car. You agree to pay back the original loan amount plus interest via a set annual percentage rate (APR) over a predetermined length of time. You’ll make payments monthly until you’ve paid the loan off in full. When determining the terms of your loan, lenders consider several factors, including:
- Your income
- Your credit score and history
- Vehicle’s age
- Vehicle type
- Amount financed
- Down payment amount, if any
The lender will also consider the vehicle’s age and mileage as well as the requested finance amount when determining the length of your car loan. Most lenders won’t finance vehicles in excess of 125,000 miles or 10 years of age, so you’ll need to keep that in mind when shopping.
How Long Are Car Loans?
The standard lengths for car loans are 24, 36, 48, 60, 72, and 84 months. Few lenders will extend to the 96-month mark or finance for less than two years. According to this article from Experian, the most common length of a new car loan is just under 72 months. The new car average repayment term in quarter two of 2020 by credit score was:
- Superprime (781-850): 66.88 months
- Prime (661-780): 73.04 months
- Nonprime (601-660): 74.28 months
- Subprime (501-600): 73.30 months
- Deep Subprime (300-500): 72.46 months
The used car average repayment term for car loans in quarter two of 2020 by credit score was:
- Superprime (781-850): 63.36 months
- Prime (661-780): 67.05 months
- Nonprime (601-660): 66.01 months
- Subprime (501-600): 62.64 months
- Deep Subprime (300-500): 59.19 months
Why Would You Take Out a 72-Month Auto Loan?
Whether purchasing new or used, if you have the option for a 72-month auto loan, you might want to consider it. A longer auto loan means you can expect lower monthly payments, freeing up more of your monthly budget. Spreading your loan out over a longer period makes it more affordable. It gives you the flexibility to make the minimum auto loan payment based on your 72-month loan. If you can afford it, you can make extra payments or pay more toward the principal each month without being locked into a higher payment. Consider this new car purchase example:
- $28,000 at 3.9% for 48 months: $631 monthly payment
- $28,000 at 3.9% for 72 months: $437 monthly payment
As you can see, extending the length of your loan by two years can save you almost $200 per month. It’s important to note, however, that extending your loan length and making only the minimum monthly payments would result in you paying more overall for the vehicle than if you chose a shorter loan length. The total overall cost in this example would be:
- 48-month auto loan: $30,286
- 72-month auto loan: $31,449
You’ll pay almost $1,000 more overall to extend the length of your loan out to 72 months instead of 48 months.
The main risk of such a long-term loan is that, for a time, you may end up owing more for your car than it is worth. This can become an issue if you wish to sell or trade in your car before it’s paid off. Additionally, the older a car gets, the more likely it is to need repairs, particularly if it is out of warranty. You may end up paying for your loan and repairs simultaneously. So it’s worth considering paying off a 72-month loan early if you can to keep yourself out of this situation.
What Are the Best Auto Loan Rates for 72 Months?
Many factors determine your APR. The best auto loan rate for 72 months can vary, but according to WalletHub, the average rates for 72-month auto loans are as follows. Using the example of a $20,000 new vehicle loan for 72 months with a 20% down payment, here are the average monthly payments you can expect:
With Chase, a 72-month auto loan starts at 3.14% APR for borrowers with excellent credit. Expect monthly payments of $305 at this rate. Borrowers with bad credit will also find options with Chase but can expect higher APRs.
Wells Fargo has a starting rate for borrowers with excellent credit of 4.13% APR on a 72-month auto loan for a $314 monthly payment. If you have bad credit, you can also apply for a 72-month auto loan with Wells Fargo. However, you can expect to pay higher interest rates on your loan.
U.S. Bank has a starting APR of 4.09% for borrowers with excellent credit, giving them a monthly payment of $314. U.S. Bank extends financing to borrowers with bad credit at higher interest rates.
You can get a starting 3.99% APR with excellent credit through Capital One. Your monthly payment would be $313 for 72 months. Capital One offers borrowers with bad credit the opportunity to apply for financing at higher rates.
Borrowers with excellent credit can get an APR as low as 4.83% at Huntington Bank, making their monthly payment $321. If you have bad credit, Huntington Bank might offer financing at a higher APR.
As you can see, interest rates vary significantly from one lender to the next. In this scenario, the range is from 3.14% to 4.83%, creating an approximate $15 per month difference in payments. That might not seem like much, but remember that the difference is $15 per month for 72 months. That $15 per month adds up to $1,080 more for a higher interest rate over the 72 months. The lender you choose can make a difference in how much you end up paying overall.
Researching auto loan rates and terms before setting foot in the dealership can be advantageous, as you will know what you can expect for a monthly payment. You can use this website’s loan calculator to run various scenarios for interest rates and loan lengths to provide you with more concrete numbers if you know your credit score, vehicle amount, and down payment amount.Compare multiple lenders to ensure you get the best dollar value.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.