Are You Following Clark’s Maximum Auto Loan Length Rule?

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Behind purchasing a home, buying a car is typically the second-most expensive thing most people will ever buy. If you choose to spread out your car payments over many years, it could be a long and rough ride.

According to the latest data from vehicle research site, 64.5% of car owners who signed on for a monthly $1,000+ car payment, are locked into car loans that span between 67 and 84 months on average.

That’s two to four years longer than any auto loan money expert Clark Howard wants you to take!

3 Reasons Why Long Auto Loans Are Bad News

Longer auto loans are attractive to a lot of consumers because of the lower monthly payments, but there are several drawbacks to them.

1. They’re More Costly

How much you pay in interest has a lot to do with how long your auto loan is and the principal balance.

For example, if you sign on for an 84-month car loan, your lender will amortize the principal and interest over seven years. If your car loan originally costs $20,000, you can expect to pay that plus whatever the interest rate is over that extended period. 

The benefit of a lower monthly payment will be offset by you paying more money out of your pocket for a longer time.

2. You’re Likely To Finance More Money

One thing about stretching out your auto loan for a number of years is that you’ll pay that much more money.

It’s always good to be smart about taking on debt, but because of the inflated vehicle market, Clark wants you to be especially careful about financing anything, including a car, right now.

“Unless you are sitting there with tons of cash, you don’t want to be in a position where you’re taking on new debt obligations. I don’t care how good the deal is, and I’m the deal guy,” Clark says. “Don’t buy ‘deals’ that would put you into debt.”

3. You Could End Up ‘Upside Down’

The longer your loan term, the greater likelihood that you could end up owing more than the car is worth, a term referred to as being “upside down.” With a shorter loan, your vehicle will likely retain more of its value by the time you’ve paid it off, compared to a longer loan.


Because of depreciation, your vehicle’s value will typically decrease as it ages, although how much depends on many factors. But you know what won’t decrease? Your car loan.

Regardless of a car’s value, if you still owe money on it, you’ll either have to pay off the existing loan or transfer it to your new loan. And that’s not a good scenario for your wallet.

Clark Howard: 42 Months Should Be Your Maximum Auto Loan Term

Clark Howard has long advised people that shorter is better when it comes to auto loan terms.

“The longest auto loan you should ever take out is 42 months,” Clark says. “If you can’t afford the payment on a 42-month loan, then you should buy a cheaper car.”

Final Thoughts

As you can see, there are multiple reasons why you should keep any automobile loan length to a minimum.

If you’re currently saddled with a long auto loan, Clark wants you to know that, if you can qualify for a lower interest rate, you should jump on it — as long as it doesn’t involve extending your length.

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