Auto Loans

Comparing Auto Loan Payments for 48, 60 and 72 Month Auto Loans

When you head to the dealership to buy a new car, the last thing you want to have to deal with is comparing auto loan payments for different loan terms. There are often many choices as auto loan terms vary from as short as 24 months to as long as 96 months.

For most people, a loan somewhere in the middle will be the best fit for their financial situation. Loans shorter than 48 months usually come with high payments due to the shorter time to pay the loan back. Loans longer than 72 months often mean you’re buying a car that you probably can’t easily afford which will cost you more in interest payments over the life of the loan.

Of course, payments aren’t the only thing to consider when taking out an auto loan. Interest rates usually differ between auto loan terms. In general, the shorter the auto loan term the lower the interest rate will be. The opposite is also true with longer auto loans usually having higher interest rates. Even if interest rates between auto loan terms are the same, the longer the loan is the more you’ll pay in interest over the life of the loan.

So how do you pick whether you should take out a 48, 60 or 72 month loan? Here are a couple examples that show how auto loan payments compare between the three term loans mentioned above.

Comparing Auto Loan Payments with the Same Interest Rate

Let’s say you somehow would be able to get the same interest rate on a 48, 60 and 72 month loan. How would the loans differ? Here are some differences if you were taking out a $30,000 auto loan at 1.9% interest. The 48 month loan would have the highest monthly payment of $649.55 and you would pay $1,178.17 in interest over the life of the loan. The 60 month loan would have a monthly payment of $524.52 and you would pay $1,471.29 in interest over the life of the loan. The 72 month loan would have the lowest monthly payment of $441.20, but you’d pay $1,766.20 in interest over the life of the loan.

Comparing Auto Loan Payments Using Realistic Interest Rates

You can’t always find the same interest rates for 48, 60 and 72 month loans from a lender. While it can happen, it is more realistic for longer loans to have higher interest rates. If you took out the same $30,000 auto loan with interest rates of 1.84% for the 48 month loan, 1.99% for the 60 month loan and 2.69% for the 72 month loan, your monthly payment would be $648.76, $525.70 and $451.66, respectively. Because interest rates increase with the loan terms, you’d pay $1,140.52 in interest over the life of the 48 month loan, $1,542.09 in interest over the life of the 60 month loan and $2,519.64 in interest over the life of the 72 month loan.

Comparing Loan Amounts with the Same Monthly Payment

Even though longer term loans generally have higher interest rates, longer loans can allow you to buy a more expensive car for the same monthly payment. Let’s say you want to take out a loan with a $500 monthly payment using the same interest rates as above. You’d be able to take out $23,121 toward a car purchase with a 48 month loan, $28,533.30 with a 60 month loan and $33,210.70 with a 72 month loan.

Different Loan for Different Situations

The difference in interest rates and total interest paid between a 48 and 72 month auto loan may not be a big deal to many car buyers. If that’s the case for you, you may want to opt for the flexibility a longer term auto loan with lower monthly payments offers. However, if you hate paying interest to banks, you’ll likely want to stick with the shortest term auto loan you can fit into your monthly budget.

If you’re ready buy a car, make sure you shop around for the best auto loan for your situation before you head to the dealership. Hopefully the examples above have helped you determine what term auto loan you’d like to use for your new purchase. Once you have determined the term you desire, find a loan with the best interest rate and other terms so you can pay as little as interest as possible. Your bank account will appreciate the extra effort.


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