When buying a new or used car, financing plays a major role in making your purchase affordable. An 84 month auto loan a loan spread over seven years can seem like a tempting option for buyers seeking lower monthly payments.
However, while the idea of smaller monthly installments is appealing, the longer term comes with unique advantages and drawbacks you should carefully consider. In this guide, we’ll break down how 84 month loans work, who they suit best, and the key factors to evaluate before making a decision.
Understanding an 84 Month Auto Loan
An 84 month auto loan is a financing option that extends your repayment period to seven years. The primary benefit is clear: because the payments are spread over a longer time, your monthly bill becomes more manageable. This structure can make higher-priced vehicles seem within reach, particularly for buyers with fixed incomes or limited budgets.
However, the trade off is that you will likely pay more interest over the life of the loan, even if the annual percentage rate (APR) is competitive. It’s essential to run the numbers before committing so you understand the total cost of ownership.
Why People Choose an 84 Month Auto Loan
There are several reasons buyers opt for a long term car loan:
Lower Monthly Payments: Spreading payments over seven years can reduce the monthly burden, freeing up cash for other expenses.
Buying a Better Vehicle: A longer term can make a more expensive car fit your budget.
Budget Predictability: Fixed, smaller payments make it easier to plan household finances.
While these reasons are compelling, they should be balanced against the potential downsides.
The Benefits of an 84 Month Auto Loan
Even though a long term loan is not for everyone, there are situations where it works well:
1. Manageable Monthly Costs
For buyers who prioritize lower monthly payments, an 84 month auto loan can provide breathing room in their budget. This can be especially helpful for families juggling multiple financial obligations.
2. More Vehicle Options
If your dream car is slightly out of reach financially, a longer loan term can bring it within range without drastically increasing monthly expenses.
3. Flexibility with Cash Flow
A smaller car payment can free up funds for savings, investments, or emergency expenses, which can be a smart financial move if managed carefully.
The Drawbacks You Must Consider
Before committing to an 84 month auto loan, it’s essential to weigh the potential downsides carefully. While the appeal of smaller monthly payments is strong, these long term loans carry several hidden costs and risks that could impact your financial stability.
1. Higher Total Interest Costs
Even with a relatively low interest rate, the extended repayment period means you’ll end up paying more in total interest over the life of the loan. For example, a buyer might save $150 a month compared to a shorter loan, but over seven years, this could add up to thousands in extra interest. In other words, the short term relief in monthly payments often comes with a long term financial burden.
2. Greater Risk of Negative Equity
Vehicle depreciation is unavoidable, and most cars lose a significant portion of their value within the first three to five years. With a long term loan like an 84 month option, the slow pace of principal repayment means you could owe more than the car’s actual value for much of the loan term. This situation often called being “upside down” or “underwater” on your loan can make it difficult to sell or trade in your vehicle without taking a loss.
3. Extended Financial Commitment
A seven-year loan locks you into a lengthy financial obligation. Life circumstances can change job loss, medical emergencies, or a growing family may alter your budget and priorities. With an 84 month loan, getting out early can be challenging, and paying it off faster often requires additional lump sum payments. This lack of flexibility can strain your finances if your situation shifts unexpectedly.
Who Should Consider an 84 Month Auto Loan?
An 84 month auto loan can be a good choice for certain types of buyers. It works well for those with a steady, reliable income who plan to keep their vehicle for many years without trading it in. It may also benefit buyers who urgently need a car but want the lowest possible monthly payment to fit their budget. Additionally, it can be helpful for individuals carrying other high interest debt, as freeing up cash each month can make it easier to pay that debt off faster. If you fit one of these profiles, an extended loan term could work in your favor provided you fully understand the total costs involved over time.
Smart Tips for Managing an 84 Month Auto Loan
If you decide to go with a long term loan, these strategies can help reduce financial risks:
1. Negotiate the Purchase Price
Before talking about financing, negotiate the lowest possible price for the car. This will reduce the amount financed and your interest costs.
2. Make a Larger Down Payment
A bigger down payment reduces the loan amount, which lowers your total interest and can help you avoid negative equity.
3. Consider Early Payments
Paying more than the required monthly amount can shorten your loan term and save money on interest.
4. Shop for the Best Rate
Different lenders offer different terms and interest rates. Comparing multiple offers can help you find the most favorable deal. For example, you can explore options from reputable auto loan providers like Bankrate, which compares rates from multiple lenders.
Alternatives to an 84 Month Auto Loan
If you’re unsure about committing to a full seven year loan, there are several smart alternatives worth exploring:
Shorter Loan Terms: While your monthly payments will be higher, you’ll save a significant amount on interest over the life of the loan, helping you pay off the car faster.
Leasing: If you enjoy driving a new vehicle every few years and prefer lower monthly payments, leasing could be a more flexible and budget friendly option.
Certified Pre Owned (CPO) Vehicles: These offer the reliability and warranty benefits of a newer car, but at a much lower cost than buying brand new.
Final Thoughts: Is an 84 Month Auto Loan Worth It?
An 84 month auto loan can be a valuable tool for buyers who need affordability and flexibility. However, the longer repayment period means you’ll likely pay more interest and face the risk of negative equity. To make the most of this option, evaluate your financial stability, consider the total cost of ownership, and explore all financing alternatives before committing.
If you approach the decision with a clear understanding of the pros and cons, you can make a choice that aligns with both your short-term budget and long term financial goals.
