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What Is an 84-Month Auto Loan and Should You Take It?

  • Auto Refinance
  • Renee Martin
  • 10 minutes

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With auto loan payments becoming expensive, more car owners are looking to save by taking 84-month auto loan terms. But will you really save in the long run, and when should you choose such an option?

One of the biggest doubts you will have when buying a car is what loan term to sign up for. After all, new cars don’t come cheap – and your default thinking is to reduce your monthly payments as much as possible and stagger the interest over the long term. If lenders sense this, they may push you to sign up for an 84-month loan.

You won’t be the first to accept – data from Experian shows that more than 25% of auto loans in America consist of 72- or 84-month loans! So, should you really consider a long-term loan as a viable financing option?

 

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What is an 84-month auto loan?

An 84-month auto loan is one of the longest loan terms provided by auto lenders. While some lenders even offer 96-month loan terms, 84 is the most widely accepted upper limit. The benefit of such a long term is that you can spread out the monthly payments in an affordable way. This is most useful for people with low incomes or those who are self-employed and do not have a stable income.   

An 84-month loan term gives you the benefit of the lowest monthly payment in the market, which you can repay over the course of 7 years. However, there is also a significant risk – you will have to pay much more as interest in the long run. 

when should I refinance my car

What are the benefits of an 84-month car loan? 

Budget-Friendly Monthly Payments

Opting for an 84-month loan provides the advantage of lower monthly payments. Therefore, you are offered a choice if you are within a tight budget and still need a vehicle. In other words, the extended repayment period of seven years contributes to a more manageable monthly financial commitment. 

Debt-to-Income Ratio Improvement

The extended loan term not only lowers monthly payments but also reduces your debt-to-income ratio. So, a lower debt-to-income ratio enhances your eligibility for future loans, with the potential for more favorable terms.  

Refinancing Opportunities

The extended repayment duration offers the potential to refinance in the future. For instance, refinancing involves replacing the existing loan with another one with better terms and lower interest rates. So, this structure allows flexibility for refinancing if you qualify for it.  

Also Read: Does a 72-Month Loan Make Sense for Your Finance?

What are the disadvantages of an 84-month car loan? 

Costly Interest  

The monthly payments might be lower than the interest can accumulate over this extended period. Therefore, in such cases, the 84-month loan is more expensive due to prolonged interest payments. 

Extended Payment Duration

The duration of an 84-month auto loan can be tempting when you think about the time it can give for repayment. However, committing to an 84-month auto loan means prolonged years of repayments. This can prove to be a tricky situation if your financial situation changes or if you switch vehicles.  

Depreciation Concerns

Eighty-four months is the right amount of time for cars to depreciate. As a result, you can end up paying more than the car’s current value. Therefore, selling your car will also become slightly complicated and may not fetch you the profit you expected initially.  

When to get an 84-month car loan? 

As a Budget-Friendly Option

When you are on a budget, then the 84-month loan will offer affordable monthly payments. If you want to lock in the lowest rates, refinance is the best option.  

When it is a Reliability Investment

A long-term loan like this is a good option if you are looking for a more reliable car as a long-term investment.  

Early Repayment Advantage

If the loan allows early repayment, then considering an 84-month loan will provide enough room for savings on interest fees. However, make sure about the associated penalties before finalizing the loan agreement. 

Refinancing Strategy

You can always use the 84-month loan as a refinancing strategy. For instance, you plan to refinance in the future for better terms. Furthermore, you can secure a reliable vehicle within your current budget and aim to refinance when your financial situation improves. 

0% Interest Opportunity

Some lenders offer 0% APR on 84-month loans. So, you can repay the loan without any accumulating interest.

When to Avoid an 84-Month Car Loan 

If you can afford shorter terms

While monthly payments may be higher, this option results in lower overall interest payments and quicker full ownership of the car. Therefore, if your budget allows, choose a shorter loan term. 

Consider Repair Costs with Extended Ownership

A longer term means more wear and tear for your vehicle. As a result, Anticipate potential maintenance issues with an 84-month loan. As the car ages over seven years, wear and tear increases and could lead to higher repair expenses. 

Evaluate Interest Rates

Long-term loans like this come with high-interest rates. Therefore, carefully examine the rates and what they mean in the long term.  

Make a Note of Your Warranty

If you think it is certainly pointless to pay for your car even after the warranty ends. In other words, most cars have a warranty of not more than three years. So, with depreciation and no warranty, evaluate why you need a loan that spreads over 6 years.  

84-month Auto Loan Rates 

 

Like any other insurance or loan, the rates directly depend on the applicant’s credit score. According to the Experian State of Automotive Finance Market Report (Q1 2023), the average new loan APR is 5.18 for a credit score between 781 and 850. However, the loan rate increases to 14.08% if you have a credit score below 500.  

Similarly, the average used auto loan APR is 6.79% for credit scores between 700 and 850. It spikes to 21.32%.  

How much interest do you pay on an 84-month car loan?

Let’s understand this using an example. Imagine you’re planning to buy worth $40,000, with a down payment of $5000. You intend to borrow the remaining $35,000 from a lender at 5% APR but are confused about what loan term to choose.

Using an auto loan interest calculator, you can find amortized monthly payments and the total amount of interest you will pay for various loan terms starting from 12 months to 84 months.

Loan Term Monthly Payment Total Interest Paid 
12 months $2996 $955
24 months $1535 $1851
36 months $1048 $2763
48 months $806 $3689
60 months $660 $4629
72 months $563 $5584
84 months $494 $6553

As you can see from the table, an 84-month car loan has a lower monthly payment, which can seem pretty tempting to take. However, you will pay a whopping $6553 as interest charges in the long run! The average monthly payment in the US today is roughly around $650 – which corresponds to a 60-month loan term. So it’s best to stick to within 60 months to get optimum value from your loan.

 

Can you refinance an 84-month auto loan?

Yes, one way out of a long-term car loan is to refinance it to a shorter term by applying with a new lender.

Which are the recommended providers of 84-month auto loans?

Here is a list of prominent lenders who offer 84-month car loans.

  • PenFed Credit Union
  • LightStream
  • Consumers Credit Union
  • Chase Auto
  • myAutoLoan
  • Autopay

Alternatives to an 84-month auto loan

In some cases, your lender may not offer you an 84-month loan, and your APR may be too high for a short-term loan to make sense. If you still want to buy a vehicle for daily use, then these are some alternatives:

Try getting a co-signer

Having a co-signer onboard can help you qualify for a better rate or loan term. The co-signer’s credit score will be factored in when the lender analyzes your profile.

Buy a used car instead

Used cars have higher interest rates due to the reduction in the value of the car and increased risk of breakdown after a few years. However, they will be easier to finance because of the lower loan amount you need to borrow.

Lease a car instead of buying one

If you don’t have enough money to buy a car outright or to take out a new loan, leasing one is a good option. That way, you can drive a car for a few years and then buy it out at the end of the lease period.

Bottomline

The 84-month auto loan comes with a set of perks and drawbacks. While it provides affordable payment options, you should carefully examine the rates according to your specific financial situation, credit score, term length, and even the car’s warranty period. So, the option to choose it is based on affordability and how long you intend to keep the vehicle.  

Frequently Asked Questions

Is an 84-month car loan okay?

Ideally, you should only choose an 84-month loan if you are okay with the idea of paying more interest in the long run. While it is true that you will not feel the pinch of expensive monthly payments, you will lose more money than if you picked a short-term loan.

What is the average car loan length? 

The average car loan length as of 2023 is roughly seven years. That means many car owners have signed on for longer loan terms in the 60-84 months range. 

Do 84-month auto loans have lower interest rates? 

Several factors determine the interest rate on your auto loan. For example, your credit score, payment history, and debt-to-income ratio, certainly not just the loan term. Rates can range from 3% for individuals with excellent credit to 20% for those with poor credit. If you have a higher interest rate, opting for an 84-month term is not advisable, as it could accumulate significant interest costs. 

Is taking out an 84-month loan for a used car a good idea? 

No, buying a used car with an 84-month loan is not recommended because used car rates tend to be higher than new car loan rates. According to Experian, the average new car loan rate in the US is 4.05%, while that for used car loans is 8.67%. 

Do banks allow 84-month auto loans?

Yes, you can sign on for an 84-month loan with banks, credit unions, dealerships, and private lenders. Rather than signing on for the first long-term loan you get, shop around with multiple lenders, compare the loan rates and terms, and choose one that offers the best balance between affordability and convenience.

What does 0% financing for 84 months mean?

0% financing simply means that you won’t have to pay any interest on your auto loan. While it seems pretty tempting, it is very hard to qualify for. Very few lenders offer 0% financing deals, primarily because not charging interest takes away their profit margins. In fact, they will be losing money given the inflation every year! Therefore, 0% financing is only offered to borrowers with excellent credit scores – 740 and above.

 

 


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