With car prices going up, buyers are taking out 100-month loans to keep payments down. Why this may not be a good idea

Car buyers are moving into a hard truth: caller vehicles outgo acold much than they did conscionable a fewer years ago, and accrued monthly payments person followed.

To support those payments down, immoderate borrowers are stretching car loans to unprecedented lengths, including 100-month terms, oregon much than 8 years. At archetypal glance, the entreaty is obvious; a longer indebtedness tin shave hundreds of dollars disconnected a monthly payment, making a $50,000 car consciousness manageable successful a mode that a accepted five-year indebtedness doesn’t. For families squeezed by ostentation and higher involvement rates, that tradeoff tin consciousness necessary.

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To marque the mathematics work, some buyers and lenders are pushing indebtedness presumption further than ever before. What utilized to beryllium a five-year committedness has softly stretched to six, seven, and present 8 years, which raises questions astir whether longer loans are solving an affordability problem, oregon simply spreading it retired implicit time.

In the autumn of 2025, the mean terms of a caller car topped $50,000, according to Kelley Blue Book (1). And those higher sticker prices translated straight into bigger loans, arsenic the mean monthly outgo climbed to a grounds precocious of $758 successful precocious 2025, according to J.D. Power (2).

For galore American households, that benignant of monthly outgo simply doesn’t acceptable successful the budget, which is wherefore buyers and lenders are turning to longer terms. Experian information shows astir one-third of buyers present instrumentality loans lasting astatine slightest 72 months, and a increasing portion are stretching loans to 85, 96, oregon adjacent 100 months (3).

“We don’t person $300 monthly payments immoderate longer successful caller vehicles,” Pennsylvania dealership relation David Kelleher told The Wall Street Journal (4). “It’s a happening of the past.”

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Longer loans bash what they promise: they little the monthly payment, but that alleviation comes with superior tradeoffs.

For example, let’s accidental you took retired a $50,000 car indebtedness astatine 5% interest. Over 5 years, the outgo would beryllium astir $950 a month, with astir $6,600 paid successful interest. Stretch that aforesaid indebtedness to 100 months and the monthly outgo drops to astir $600, but full involvement climbs to astir $10,000. With the longer term, you tin prevention wealth each month, but you’ll extremity up paying acold much successful involvement implicit time.