Car shoppers are extending the length of their auto loans—and this may end up being more expensive than it appears

Main Points to Remember

• Over 20% of car loans now extend for seven years or longer.
• While stretching out loan terms can lower your monthly payment, it also means paying more in total and taking on greater financial risk.
• If paying off your car in five years isn’t possible, you might want to look at less expensive vehicles, consider used cars, or increase your down payment.

Why More People Are Opting for Extended Car Loans

With car prices and interest rates on the rise, many buyers are turning to longer auto loans to make their purchases more affordable. Although financial experts typically advise against loans longer than five years, it’s now common for borrowers to still be making payments after seven years.

Recent data from Edmunds shows that more than one in five auto loans now last seven years or more—a record high. The average loan duration has also increased, reaching 69.6 months for new vehicles and 70.1 months for used ones in the last quarter of 2025.

Experian, another leading authority in auto finance, reports similar findings. In the third quarter of 2025, nearly 70% of new car buyers who financed their vehicles chose loans longer than five years, with some extending to seven years or beyond.

Auto Loan Durations Are Increasing

A decade ago, the typical new car loan lasted 67.8 months, while used car loans averaged 66.5 months. Today, both figures are approaching 70 months, highlighting a clear trend toward longer repayment periods.

Although smaller monthly payments can make a car seem more attainable, the long-term reality is that you’ll pay more in interest and face higher financial risks.

The True Cost of Extending Your Auto Loan

Most car buyers rely on financing, and dealerships often focus on keeping monthly payments low. Longer loan terms are appealing because they can significantly reduce your monthly bill.

However, the trade-off is that the total cost of the car increases, since you’ll be paying interest for a longer time.

Consider this example: If you purchase a new car for $50,000 (about the current average), with a $5,000 down payment and a 7% fixed interest rate on the $45,000 loan, here’s how a five-year loan compares to a seven-year loan:

Choosing the seven-year loan reduces your monthly payment by about $212, but you’ll end up spending nearly $3,600 more overall.

Interest rates on auto loans are often influenced by your credit score. Those with lower or limited credit histories may face even steeper costs. Longer loans also increase the risk of owing more than your car is worth—a situation known as being underwater. This can make it difficult to sell or trade in your vehicle without paying extra and could result in financial loss if the car is stolen or totaled.

What to Think About Before Committing to a Longer Loan

Extending your loan term means paying more for your car in the long run and increases the chance that your vehicle’s value will drop below what you owe. These scenarios can put a strain on your finances.

Before agreeing to a longer loan, calculate the total cost, consider how long you plan to keep the car, and ask yourself if you could still manage the payments if your financial situation changed. While longer loans lower your monthly bill, they also lock you into a longer commitment.

If stretching the loan is the only way you can afford the car or qualify for financing, it may be a sign that the vehicle is outside your budget. In that case, consider a less expensive model, a used car, or saving for a larger down payment to reduce the amount you need to borrow.

Although longer loans can make higher-end cars seem affordable, they come with higher overall costs and less financial flexibility. For many buyers, it’s safer to lower your budget or pay more upfront rather than extend the loan term.