If you’re in the market for a used car, you may be considering obtaining a loan. An auto loan allows you to purchase a car without needing to pay the full amount upfront. You repay the loan over a fixed period and pay interest on the borrowed amount.

Lenders typically offer loans with terms ranging from 36 to 72 months, although longer and shorter terms are available. Even with the most accommodating lenders, there is generally a maximum loan term you can select. If you’re curious about how long you can finance a used car, here’s what you should know.

How Many Years Can You Finance Your Used Car?
Different lenders have varying policies regarding the duration for financing a used car. Some lenders may cap loan terms at 84 months, while others might offer loans for up to 96 months. Traditionally, used car loans had a maximum limit of 72 months. However, as the demand for used cars increased, lenders began offering loans of 84 months and even longer to accommodate consumers.

Is There a Limit to How Long You Can Finance a Used Car?
There is no universal maximum loan term for used cars. However, lenders and banks generally adhere to common guidelines, especially concerning the vehicle’s age and mileage.

For instance, you typically cannot finance a used car older than 10 years with a five-year loan. Similarly, you may not be able to finance a car with 150,000 miles for more than three years.

The best way to determine how long you can finance a used car is to review your lender’s guidelines or consult a representative.

Short vs. Long Car Loan Terms
Before financing a used car, consider several factors, including the repayment period of the loan. Car loans can be classified as short-term or long-term. Depending on your lifestyle, budget, and spending habits, one type may be more suitable for you than the other.

For example, if you prefer driving the latest models with modern features, a short-term loan may be ideal. Conversely, if you enjoy creating lasting memories with the same car for as long as it serves you, a long-term loan might be a better fit.

Short Used Car Loan Terms: Pros and Cons
Short used car loan terms typically range from 12 to 60 months. The advantages of this financing period include:

• Refinancing: One effective way to enhance your credit score is by making consistent, larger payments. By making higher payments over a shorter loan term, your credit score may improve, allowing you to refinance for a better interest rate.
• Lower Interest: Many people opt for short-term loans to minimize the amount of interest paid over the life of the loan.

Paying off the loan early: By opting for a short-term loan of no longer than five years, you’ll gain more financial freedom in the long run. Additionally, the more you pay each month, the sooner you’ll eliminate the loan.

While a short used car loan may seem suitable for your plans, consider these potential downsides:

Less room for budgeting: Although short-term car loans are effective for quickly paying off debt, they require adherence to a strict financing plan. If an unexpected expense arises and you need a significant amount of money, you might find yourself in a financial bind due to the loan’s high monthly payments.

Higher monthly payments: You will need to allocate more money each month to repay your used car loan over a shorter period. Making a larger down payment can significantly reduce your monthly payments.

Long Used Car Loan Terms: Pros and Cons
Long used car loan terms typically range from 72 to 85 months or longer, offering customers several advantages, including:

Lower monthly payments: One of the main benefits of long used car loan terms is payment flexibility. Spreading the cost of your car over an extended period results in lower monthly payments.

More savings: Smaller monthly payments allow you to save more money. If you consistently set aside enough in a savings account, you might be able to pay off the loan early thanks to the interest accrued.

Despite the advantages of lower monthly payments, payment flexibility, and increased cash flow, long used car loan terms also have some drawbacks to consider, such as:

Depreciation: Cars lose value as soon as you drive them off the dealership lot. While used cars depreciate more slowly than new ones, their value still declines over time. The longer it takes you to pay off your car, the less value it will have. If its value falls below what you owe on the loan, you’ll be upside down, making it difficult to trade in your car.

More interest: Longer car loans typically come with higher interest rates because the longer the loan, the more time interest has to accumulate. You may end up paying more over time than you initially anticipated. To understand the total cost, be sure to ask your lender about the interest rate.