More car buyers are turning to 84-month auto loans as a way to manage monthly expenses amid rising everyday costs. According to auto refinancing company Caribou, demand for seven-year loan terms has reached record levels this year, driven largely by inflation and other financial pressures on household budgets.
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Why Buyers Are Choosing Longer Terms
Extending a loan term can meaningfully lower monthly payments, in some cases by roughly $150 per month, which can offer noticeable short-term relief for households managing rising grocery, housing, and medical costs. Caribou’s data indicates that many drivers are prioritizing immediate affordability over the long-term cost of the loan.
The Tradeoff: Lower Payments, Higher Total Cost
Extending the loan term increases the total interest paid over the life of the loan. For example, financing a $35,000 vehicle at 9% interest over four years results in roughly $6,800 in total interest. Stretching that same loan to seven years lowers the monthly payment to around $563, but increases total interest paid to approximately $12,000, nearly double the shorter-term cost.
A Risk of Owing More Than the Car Is Worth
Longer loan terms also increase the risk that a vehicle’s value will depreciate faster than the loan balance decreases, potentially leaving buyers owing more than the car is worth for a significant portion of the loan term. Despite these tradeoffs, extended loan terms continue to gain popularity among buyers focused on managing their immediate monthly budgets, even as the long-term cost of ownership rises as a result.