How Long Can You Finance a Used Car?

How Long Can You Finance a Used Car?

May 17, 2019    Financing & Leasing

If you’re planning to finance the purchase of a used car, it’s important to understand how long the loan extends. Your loan term can impact your monthly payments and the total cost of borrowing.


What is a loan term?

Your loan term is simply the amount of time you have to repay the loan in full, as specified by the financing agreement you have with the lender.

Loan terms for used vehicles may be expressed in months or years

What is the longest loan term allowed for a used car?

Every lender chooses where to set the minimum and maximum loan term allowed for used car financing.

Generally, the longest loan term you’ll find is seven years, or 84 months. There are, however, some lenders that will extend used car financing to 92 or 96 months, or up to eight years. In 2018, 55% of new car loans originated were for 84 months.

At a minimum, used vehicle financing loans typically start at two years or 24 months.

What are the pros and cons of choosing a longer loan term?


  1. A lower monthly payment

The chief benefit of choosing a longer term when financing a used vehicle is that it can result in a lower monthly payment. That could be important to you if you want to buy a car without putting a substantial strain on your budget.

  1. More buying power

Another advantage of choosing a longer loan term is that you might be able to afford a more expensive vehicle. You might have a larger loan as well but your payments could still be relatively low.


  1. Interest will cost you more

One key downside of opting for a longer loan term means paying more in interest charges over the life of the loan. That increases your total cost of borrowing.

  1. Depreciation could catch up to you

There’s also the risk of becoming underwater if the vehicle loses value quickly. You may end up owing more on the vehicle than what it’s worth.

  1. The loan could last longer than the car

Another possibility is the loan outlasting the vehicle’s useful life span.

If the car breaks down and is irreparable or the cost of repairs would exceed its value, you may be looking at financing another vehicle purchase while paying off your original loan.

What’s the ideal amount of time to finance a used car?

The industry standard for the ideal length of time to finance a used car is no more than 60 months, yet over half of all new loans are financed for 84 months. Having a five-year loan gives you sufficient time to repay the loan at a payment that’s manageable, without overpaying for interest charges.

The ideal financing term for you depends largely on what you can afford to pay monthly and how long you’re comfortable making payments on the loan.

If you think you’d like to trade up to a newer used vehicle in a few years, for instance, a shorter term may be better. On the other hand, if you want to get the lowest payment possible, then a longer loan term could provide that.

Consider the numbers carefully before choosing a loan term

Financing a used car isn’t one-size-fits-all. It’s important to do your research and compare different loan terms and their associated interest rates to make sure you’re choosing the loan that’s the best fit.

At Birchwood Credit Solutions, we work with borrowers to help determine the ideal loan term for their financial situation. We encourage you to reach out to discuss loan term options as you navigate the car-buying process.

Birchwood Credit Solutions offers car loans with a wide variety of financing lengths. Call today or complete your application online to get one step closer to financing your next used car purchase.

Rebecca Lake
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