Does it matter how many months my auto loan is amortized for?

Choose your terms wisely

If a lender is willing to allow you to draw the terms of your auto loan out for several years, don’t immediately jump at the option before looking into what it means in the long run.

The most common auto loan amortization is 60 months, or five years. This is an industry standard, although other loan terms can be offered including lower (48 months or less) and higher (72 months or more) terms.

One thing you should realize is that in general, the higher the number of months your loan is amortized for the higher your interest rate may be. This does not, however, usually apply to loan terms under sixty months.

In other words, whether your loan is 36-months or 48-months, you will probably have the same interest rate. It’s when auto loans creep past the 60 months amortization that interest rates may begin to climb.

Keep in mind that although loans with longer repayment terms often have lower monthly payments than short-term loans, you do usually end up paying more interest over time.

For example, a 72-month loan will have a lower monthly payment than the same loan amount and interest rate given with a 48-month repayment term. The borrower, however, will end up paying more interest overall with the 72-month loan, despite the lower monthly payment.

See our monthly auto loan payment calculator to estimate what your monthly payment will look like with differentinterest rates, repayment term lengths, etc.

Instead of securing an auto loan with a longer amortization you may want to consider putting a sizable down payment on the car (if possible). You may also consider simply buying a car that is less expensive so you can avoid extending the repayment period and also avoid ultimately paying more in interest.

Recommended resource: Auto loan calculators