Are you in the market for a new car? Do you have plans to finance the purchase as opposed to paying with cash?

As you move through the buying process, you’ll soon have to answer a variety of questions related to your loan:

• Which lender is best for you?
• What interest rate do you qualify for?
• What term will you choose?

While all of these questions are important, we’ll focus on the last one in this article. More specifically, we’ll examine the pros and cons of a 72 month car loan.

Let’s start by digging into some of the benefits:

• Lower monthly payments: The longer the term, the lower your monthly payment. Do the math — comparing a 72 month loan to other terms — to better understand the impact on your monthly payment.
• Financial flexibility: With a lower monthly payment, you have more money for other expenses and purchases.
• A more desirable car: This goes along with the point above about a lower monthly payment. As the term increases, so does the amount you can afford on a monthly basis. This may allow you to purchase a more desirable vehicle.

With that out of the way, it’s time to turn our attention to some of the drawbacks of a 72 month car loan:

• More money paid in interest: The longer the term, the more you’ll pay in interest. Furthermore, longer term loans generally have higher interest rates.
• Negative equity: It’s no surprise that cars depreciate quickly. And that’s especially true over the first year. The more you borrow, the greater chance there is that you’ll find yourself “upside down” on your loan. You can protect against this by putting money down.
• Warranty: Most car manufacturers don’t provide a standard warranty of 72 months or longer. For example, 3 years or 36,000 miles is standard. So, with a 72 month car loan, you’re likely to have a long period of time when you still owe money on your car, but there’s no warranty to cover repairs.

Tip: consider choosing a 72 month loan for a lower payment, with the idea of paying extra each month. If you’re unable to do so some months, you can simply pull back without penalty.

Final Thoughts

It’s these pros and cons that you need to think about when deciding if a 72 month car loan makes sense.

Only you can make the final decision, so take your time and do what’s right for you and your budget.

Do you have any experience with a 72 month car loan? Were you happy with your decision, or did you soon come to regret it?