What is the Longest Car Loan Term Available?

Longer car loan terms usually make the monthly payments more affordable. But this also means paying more compared to a shorter loan term with a higher monthly payment.   

Let’s talk about the smartest decision you can make when determining how long your car loan term should be.

What is the normal length of a car loan term?

Most loan providers have a set of standard loan terms you can choose from, ranging anywhere from 12 to 60 months. 

It’s difficult to establish a “normal” length of car loan terms because everyone is different. You’ll want to choose a car loan term that is realistically suited to your situation, your needs, and your requirements.

That being said, most financial advisers will say that you should aim to have paid back the entire loan within three years.

However, that may be an unrealistic expectation for many, so a good compromise for a normal car loan term would be within five years. 

Car Loan Terms Are Getting Longer

Word on the street is that nowadays, people are taking loans that are just far too long. In 2010, the average car loan term was set at 62 months, within an average of five years.

In 2015, the number was up to 67 months. Clark, a personal finance advice website, claims that the median car loan term has increased to almost 70 months, nearly six years. 

Even more astonishing is that when you dive deeper than the surface of these statistics, you realise that most people are taking out even longer loans.

The most popular loan category is 72 months, and other even longer ones are gaining popularity, such as 84 and 97-month loans. Yes, some people take out 8-year loans! 😮

Why do drivers choose longer loan terms?

When you think that longer car loan terms bring down your monthly repayment amount, it isn’t difficult to understand why people would want long-term loans.

Lower Monthly Payments

In some ways, even if you’re paying a higher interest rate on a longer-term loan, the fact that it is spread out over a longer period might make it more affordable for your finances. 

Higher Car Prices

The second reason car loan terms have increased so much is that car prices are getting more expensive.

New car prices have increased five times faster than wages in the UK. Seems absolutely bonkers, right? 

In any case, these new trends beg the following questions: are we moving away from the ideals of the 5-year loan? And most importantly, what should you choose? 

Can the car loan term be changed?

The short answer is yes. However, the only way to change your car loan term during your contract is to refinance your loan to adjust your term length.

In this case, you must contact your lender to discuss the options. Once you know the options, you can start weighing the best one for your situation.

Benefits of Short Loan Terms

Earlier on, we mentioned that finance experts generally recommend short loan terms. But why? Is it really that much better to go for a short loan term? Let’s dive in. 

Higher Chance of Approval

When you take out a loan from a lender, the lender allows you to access funds on certain conditions.

One of these conditions is that you have adequate funds and income to repay the lender within the term of the contract.

Shorter-term loans are less risky for lenders. If you intend to repay the lender within a shorter period, your loan application may have a better chance of getting approved.

The shorter the period you have to repay your loan, the less likely your situation will change before you’ve paid back the full amount.

It also explains why you’ll pay less interest the shorter the loan term is. Shorter loan terms mean cheaper loans because they are less risky for the lender.

This brings us to our next point. 

A Shorter Loan Term Means a Cheaper Loan

Another huge benefit to a shorter car loan term is how much of a better interest rate you can get. Since you'll repay the lender sooner, they can recoup their investment faster.

A shorter loan term also means that you’ll be able to sell a car that’s still in good condition than if you were to sell it years later with a longer car loan term.

You’ll save not only on a lower interest rate (because a short term is less risky for lenders) but also on the selling price you’ll be able to get out of your car once you’ve paid it back.

Repaying your car loan faster can amount to several thousands of pounds in savings, so it’s definitely worth considering. 

Benefits of Long-Term Loans

Of course, the main benefit of long-term loans is their lower monthly payments. You might save a substantial amount of money, which you can use for other car-related expenses.

If a £50 hole in your budget prevents you from purchasing a car, you might want to consider a long-term loan. ​​

More Affordable Monthly Outgoings

Long-term loans can also have the benefit of protecting you against any emergency expenses.

If your budget is stretched out as far as it can go each month, you won’t be able to afford any sudden spending.

However, if you have a longer loan term, you can put aside some money each month to pay off your loan early.

We have a car loan term calculator that can help you get an estimate of the cost of financing a car. Feel free to give it a try! 😊

The Bottom Line

As all things car finance usually go, the first step towards making the right decision about your car loan term is evaluating your budget. 💸

If you can’t afford to spend an extra hundred pounds a month on your car, you might want to consider getting a long loan term.

However, if you’re worried about higher interest rates, you might be able to save yourself a few hundred pounds by going for a short car loan term. 

Finance Your Car with Carmoola

Here at Carmoola, we offer flexible car loan contracts to make room for changes in your life.

Purchasing your next car should feel freeing, not stressful. Check out our video explaining how to use our app to get your car loan in a few simple steps. 

You can also read more about how Carmoola makes car finance a lot easier for you!

Got any questions for us? Feel free to contact us anytime!

If you think this article could help others figure out how to choose the best car loan term, give this article a share and spread the Carmoola love 😻