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What to Know About an 84-Month Auto Loan

When shopping for auto loans, many consumers want to secure a low monthly loan rate to make their automobile purchase more budget-friendly. The monthly payment a borrower makes on a car loan is determined by a number of factors, including loan amount, credit risk, and loan term. Additionally, just as cars have become more expensive, they have also become more reliable, and consumers want to get the most out of their vehicle investment by relying on it for several years.1 For these reasons, consumer interest in extended auto loans has risen sharply in recent years. In fact, during the last two years, extended loans (73 to 84 months) have constituted nearly 25% of new car loans.2 

Banks have begun to offer longer loan terms to accommodate the desire for a lower monthly payment, extending the amount of time that a borrower has to repay the loan and reducing the monthly payment.

How an 84-month auto loan works

For example, if a borrower applies for a 36-month car loan for $25,000 at a 4.00% annual percentage rate, the monthly payment on the loan will be $738.10. Assuming the same interest rate, if the loan term is extended to 84-months, the monthly payment would be only $341.72.

From the standpoint of a borrower whose primary objective is an affordable monthly payment, the benefit of an 84-month loan is pretty clear. The difference in the payments above is $396.38 - a reduction in the 36-month payment of nearly 54%. 

The drawback, of course, is the length of time required to repay the loan and the total cost of the financing for the borrower. A borrower with a 36-month loan would enjoy four fewer years without a car payment compared to a borrower with an 84-month car loan. And if we calculate the total amount paid over the life of the loan ($738.10 x 36 months vs. $341.72 x 84 months), we see that the 84-month borrower is actually paying $2,132.88 more for the same vehicle.

The benefits of long-term loans

Auto loans with Nationwide

Nationwide Bank views banking as a partnership, and we want to provide our customers with flexible options that help them balance their monthly obligations. Start the first step to finding your next automobile by getting preapproved for vehicle financing - it takes as little as fifteen minutes!3

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