How Long Are Car Loans Typically?

There’s a lot to think about when shopping for a car. If you’re financing your new ride, make sure you consider the length of the loan, too. Typical car loan lengths are between four and seven years long, although shorter and longer terms are also available. 

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The length of your car loan or auto loan refinancing will affect your overall costs. Longer loans may cost you more in interest over time.

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Here’s what you need to know about the length of your loan, how it impacts your payments and how to decide the right car loan length for your situation.

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What is the average car loan length?

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According to Experian, the average car loan length in the U.S. in 2024 was nearly six years: 68 months for new cars and 67 months for used cars. 

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Broken down by credit score, the group with the longest average loan length was people with a credit score of 601-660. Their new auto loans were 74 months long, on average. Those with the highest scores (781-850) had the shortest average loan length at 64 months.

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Typical car loan lengths to choose from

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If the typical car loan length doesn’t work for you, you have other options.

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The chart below shows how changing the loan term can change your monthly payment. 

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We’ll use a new car loan of $40,000 for our example, as that’s the average amount financed according to the Federal Reserve Bank of St. Louis. We’ll use an interest rate of 6%, which is the average new car loan rate as of December 2024.

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The monthly payment for a two-year loan is three times larger than for a seven-year loan. But your total costs increase with longer loan terms — you’d pay $6,536.95 more in interest with the seven-year loan.

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How loan length affects your payments and interest

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As you see in the table above, changing the length of your loan changes your monthly payment and overall interest you’ll pay on the loan. There’s a tradeoff between monthly payment amount and overall interest charged, depending on the term length. Shorter loan lengths have bigger monthly payments, but lower interest costs. Extend the loan term and you’ll get smaller payments, but higher interest costs. 

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Understanding how loan length changes these two aspects of your overall cost will help you choose the best loan length for your budget.

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Pros and cons of shorter loans

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Considering a loan on the shorter side? Here are the primary pros and cons. 

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Pros:

• Your car will be paid off sooner.
• You’ll pay less in interest.
• Interest rates are usually lower.

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Cons: 

• You’ll have a larger monthly payment.
• You’ll have less cash available for other needs. 

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Pros and cons of longer loans

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Loans of an average car loan length (or longer) have the opposite benefits and drawbacks.

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Pros:

• You’ll have a smaller monthly payment.
• You can keep some of your cash flow free for other uses.
• You can take your time paying off the car.

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Cons: 

• You may have a higher interest rate.
• You’ll pay interest for a longer period of time, increasing your overall costs.
• Extended loan terms increase the risk that your financial situation could change and make it tough to repay your loan.

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Can you pay off a car loan faster?

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A third option is to choose an average car loan length, like 60 months, but pay the loan off sooner as your budget allows. This strategy lets you pay less in interest while keeping the flexibility of a lower monthly payment.

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There are three main methods for paying off a car loan faster:

• Pay half of your monthly payment biweekly (every other week)
• Pay a big lump sum toward your principal
• Pay more toward your loan each month

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Choosing the right loan term for you

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The best loan term for your budget is a personal decision. You’ll need to weigh the savings of a smaller monthly payment against the expense of paying more in interest with the average car loan length. 

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Shop around to find different loan options and their total cost (including fees and interest) to find the best deal for your situation. RefiJet helps you compare lenders and find the best rate and terms for your situation. Get started in minutes. 

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FAQs

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Below are answers to some of the most frequently asked questions about the typical length of a car loan.

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What is a good car loan length?

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Aim for a car loan length that strikes a good balance between the size of your monthly payment and the overall interest you’ll have to pay. Although you may prefer a smaller payment, longer terms will increase your interest costs. A typical car loan length is between five and six years.

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What is the shortest and longest car loan terms that are available?

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Typically, the shortest car loan length is 24 months, or two years, while the longest car loan length is 84 months, or seven years. However, terms between four and seven years are most common.

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Do interest rates change based on how long my car loan is?

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Yes. Shorter loans present less risk for the lender, so they often have lower interest rates. Longer loans increase the risk you might default at some point down the road, so rates are higher.

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Can I refinance my car loan to change the term length?

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Of course. You can shorten or extend your auto loan term with a refinance. In fact, auto loan refinancing is a popular way of changing the loan length, interest rate and other payment terms of a car loan. 

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How can I determine the best loan term for my budget?

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The best way to decide the right loan term for your needs is to look at your budget and identify your maximum loan amount (ideally no more than 10% or 15% of your monthly income). A car loan length that will give you payments within that guideline will be your best bet.

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