When buying a new or used car, many buyers are drawn to 84 month auto financing because it promises lower monthly payments. However, while stretching payments over seven years can seem appealing, it’s not always the smartest financial move. In this guide, we’ll explore what an 84 month loan is, its advantages, potential risks, and how to decide if it fits your budget.
Understanding 84 Month Auto Financing
84 month auto financing refers to a car loan with a repayment term of 84 months that’s seven years. This is one of the longest terms available in the auto lending market. It has gained popularity in recent years as car prices have risen, making shorter-term loans harder to afford.
In simple terms, the longer the loan term, the lower your monthly payment. But there’s a trade off you’ll likely pay more in interest over the life of the loan. This is why understanding the pros and cons is essential before committing.
Why Buyers Choose 84 Month Auto Loans
Lower Monthly Payments
One of the biggest attractions of 84 month auto financing is the smaller monthly payment. This allows buyers to afford higher priced vehicles without stretching their immediate budget too much.
Access to Better Cars
Because the payments are spread out, some buyers use long term loans to upgrade to a more luxurious or newer model. While this can be tempting, it’s important to weigh whether the extra cost is worth it in the long run.
Flexible Budgeting
For households with fluctuating incomes, smaller payments can help maintain financial stability. This flexibility often appeals to families managing multiple expenses at once.
The Downsides of Long Term Auto Financing
Higher Interest Costs
Even with a competitive interest rate, a longer loan term means you’ll be paying interest for more years. Over seven years, this can add thousands of dollars to your total cost.
Risk of Negative Equity
Cars depreciate quickly, and with an 84 month loan, you could end up owing more than the vehicle is worth especially in the first few years. This is known as being “upside down” on your loan.
Extended Financial Commitment
Seven years is a long time to be tied to one loan. If your financial situation changes, getting out of the loan early could be expensive.
When 84 Month Auto Financing Makes Sense
While 84 month auto financing isn’t the right choice for everyone, there are scenarios where it can be a smart financial move. By understanding your unique situation, you can determine whether the benefits outweigh the risks.
1. Low Interest Rate
If you can secure a competitive or low annual percentage rate (APR), stretching your loan over seven years may not significantly increase your overall interest costs. This is especially true if you have a strong credit history, which can help you qualify for the best rates available.
2. Stable and Reliable Income
A steady job with predictable earnings makes it easier to commit to a longer repayment schedule. Knowing that your monthly income will comfortably cover your loan payments, along with other living expenses, reduces the risk of financial strain. This stability is crucial, as an 84 month loan locks you into payments for a long period.
3. Large Down Payment
Making a substantial down payment can significantly reduce the size of your loan and help you avoid the trap of negative equity. This means you’ll owe less than the car’s value for most of the loan term, giving you more flexibility if you ever decide to sell or trade in your vehicle. A larger down payment also improves your chances of loan approval and may even help you negotiate a better interest rate.
4. Purchasing a Low Cost or Moderately Priced Vehicle
Pairing an extended loan term with a reasonably priced car can be a smart move for budget conscious buyers. This combination allows you to enjoy manageable monthly payments without committing to an overpriced vehicle. By avoiding high end models with rapid depreciation, you can limit financial risk while still driving a reliable car that meets your needs.
Tips for Getting the Best 84 Month Auto Loan
1. Shop Around for Lenders
Different lenders offer different rates and terms. Compare banks, credit unions, and online lenders before making a decision.
2. Negotiate the Vehicle Price
A lower purchase price means you borrow less, which can reduce both your monthly payment and total interest.
3. Check Your Credit Score
A strong credit score can help you secure a better interest rate. Before applying, review your credit report and fix any errors.
4. Avoid Rolling Over Old Debt
If you still owe money on your current car, try to pay it off before financing another. Rolling over negative equity into a new loan can be costly.
Alternatives to 84 Month Auto Financing
If you’re unsure about committing to a seven year loan, consider these options:
Shorter Loan Terms: 60 or 72 months can help you save on interest.
Leasing a Car: This option usually offers lower payments without a long term commitment.
Buying a Certified Pre Owned Vehicle: These cars are often more affordable and still come with warranties.
Paying More Upfront: A larger down payment can make shorter loans more affordable.
The Role of Interest Rates in Long-Term Loans
Interest rates play a huge role in determining whether an 84 month auto financing plan is affordable. Even a small difference say, 5.5% instead of 6% can save you hundreds or thousands over the life of the loan. That’s why comparing rates is just as important as comparing monthly payments.
You can use online calculators, such as the Bankrate Auto Loan Calculator, to estimate how different terms and interest rates affect your total cost.
How to Avoid Common Pitfalls
To make the most of an 84 month loan:
Choose a car you can afford comfortably not just one that fits the monthly payment.
Consider total cost over the life of the loan, not just the monthly figure.
Plan for maintenance and insurance costs, which can add up over seven years.
Avoid taking the maximum loan term just to buy a more expensive vehicle.
Final Thoughts: Is 84 Month Auto Financing Right for You?
84 month auto financing can be a useful tool for lowering monthly payments and improving affordability, but it comes with risks. If you have a stable income, secure a low interest rate, and choose a vehicle that holds its value reasonably well, it might work in your favor.
However, if you’re stretching your budget just to get a bigger car, or if your income is uncertain, a shorter term loan could be the safer choice. The key is to evaluate both the monthly payments and the total cost making sure your decision supports your financial health in the long run.
