Don't Rush Into an 84-Month Car Loan

That’s because some cars depreciate at a faster pace than a loan can be paid down, especially over so many years. That means there could be a period when you owe more than your vehicle is worth, also known as being underwater or upside down. And today’s higher interest rates will only accelerate the process. And if the car is stolen, or if it is totaled in a crash, that could mean a financial disaster.

“Stretching out the payments doesn’t make the car itself more affordable if you take the longer view,” Bell says. “It’s sort of like the frog in the pot of lukewarm water that is gradually heating up. You don’t notice the change year over year, but if you step back and look at what is happening to consumer household budgets, you see many people really straining to keep up with the rising costs of vehicle ownership.”

Sometimes, a long loan can stretch out, further increasing the risk of negative equity. For example, if you’re having trouble making loan payments, you may qualify for a payment deferral plan, says Bell. When they’re approved by the lender, deferral programs delay the onset of financial responsibility by several months if you’re experiencing employment instability. Keep in mind, though, that the vehicle continues to depreciate while you’re not making payments. Nana-Sinkam says that even though a payment deferral delays paying off a loan and can increase the total amount paid, three months isn’t likely to make a significant difference.

Nana-Sinkam says low-interest, long-term loans will mainly appeal to two very different types of buyers: the “buy and hold” shopper who plans to drive the car until the wheels fall off and the “three-digit” shopper whose financial situation puts them at the mercy of the monthly payment amount.

“There is some meaningful part of the American consumer body that consistently has to pass on financial strategies they know are ‘smarter’ in order to make ends meet,” he says. “Over 60 percent of the American public does not have enough money in the bank for a $500 emergency. That’s uncomfortable, but it’s true.”

Bell says consumers should give themselves budgetary breathing room to free up money for longer-term investments.

“I think consumers are better off when they take a hard look at the rising cost of new cars, and are more conservative in the percentage of income they want to devote to car payments and the total cost of car ownership,” he says. “Super-long loans are not a great idea, even if it seems a lot of people are doing it. Unless you can come up with a really large down payment, you will owe more than the car is worth for many years to come.”

Not sure if you’re the “buy and hold” type? Nana-Sinkam offers sage advice on how to figure that out before you commit by asking the dealer to see a 3- or 4-year-old version of the model you intend to buy.

“Sit in it and drive it and imagine that the new one you buy will be 3 or 4 years old at some point,” he says. “This is what it will drive like and look like and smell like. Will you still be excited about it and happy you bought it? If the answer isn’t ‘heck yeah,’ then recognize that you might get an itch in the middle of a six- or seven-year car loan that is going to be hard to scratch because of that negative equity.”

The key to buying a car that will serve you for many years to come is to take your time, check the road tests and reliability information available at CR.org, and take your time with test drives. Buying a car is a big decision that can have far-reaching financial impact.