Long-Term Loans: What to Know About a 96-Month Car Loan

Specialized long-term 96-month car loans can be the right fit for you, just make sure you count the costs first.

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One of the longest car loan terms available is generally a 96-month car loan — except not every lender will offer them, and specialty lenders may have other, longer terms available.

If you're in the market for a low monthly payment, an eight-year-long car loan can provide this; although you may want to compare lenders. It's especially important to find the best interest rate available — a small change in the interest rate can have a big impact over 96 monthly payments. Since these loans are also typically beyond the array of terms offered by some car loan lenders, you might consider other options.

Here are some other key considerations to factor when it comes to choosing a 96-month car loan.

Advantages of a 96-Month Car Loan

One fairly common way that you can benefit from a 96-month car loan is if you have consistent cash flow, but not a lot of savings for a down payment relative to the price of the car. In this case, consistent cash flow doesn't necessarily mean that you make a large amount of money all the time, but rather that you have confidence that you'll be able to afford the payments throughout your eight-year loan.

This car loan length might allow you to get a vehicle with a higher-than-average loan amount, but by dividing the payment over eight years, you pay less per month than you would for a shorter loan at the same interest rate. These loans can allow more people to purchase great, long-lasting cars, since saving up for a larger down payment when you still need something to drive in the meantime can take a while.

Disadvantages of a 96-Month Car Loan

Eight-year car loans will typically cost you quite a bit more overall than other car loan options. A car loan is typically secured using the value of the car at the time of its purchase, but that value can fall faster than the remaining balance on the loan. So, the lender could lose money on the loan if the borrower was to stop making payments. This makes these loans more risky for lenders, prompting them to charge higher interest rates. You'll also be accruing interest for a longer time, so the total cost after eight years can be substantially higher than that of a shorter-term loan.

Negative equity (owing more than your car is worth right now) can be dangerous for borrowers financially, because a car accident or change in your cash flow could result in losing the car but still owing the monthly payments. These aren't always reasons to say "no" across the board to 96-month car loans, but be sure to consider the risks before you opt for this length of loan.

Top Considerations When Assessing a 96-Month Car Loan

Because 96 months is typically the longest loan term you'll find — and some places only go up to 84-month car loans — your main choice comes down to whether your circumstances truly merit an eight-year-long loan, or if you can make an alternative arrangement that allows for a shorter loan.

Prepayment penalties

One way to use a longer-term loan without paying for eight years is to ensure you have no prepayment penalty and save ahead on the loan. This way, you can save a little bit each month and, if you ever have a need to pay the loan off early, you can use your accumulated savings. This strategy allows you to have a low minimum payment and a nest egg to draw from if your circumstances change, and you don't want this car or its payment anymore.

What matters most to you?

Essentially, you'll want to ensure you're getting something quite valuable in exchange for that extra monetary commitment, and that is a matter of personal choice. Are you getting a nicer, more reliable, or more roomy car? Are you getting an exceptionally low monthly payment allowing you to prioritize other areas of your budget?

If you cannot find a compelling reason why this particular car is worth the extra money to you, remember that this isn't the last chance you have to purchase a car you love. For instance, you can purchase a used or less expensive new car with a shorter-term loan while committing to saving for that dream car's down payment on the side. Make a plan for your next car to be both a sound financial choice and a real pleasure to drive.

Bottom Line

A 96-month loan might work for your financial situation and suit your needs, but careful consideration is needed before any decision is made. Taking time to weigh the potential benefits and disadvantages can help you arrive at the choice that makes the most sense for you.

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Laura Leavitt
I love a good spreadsheet and will happily calculate compound interest all day, but my biggest focus is helping people achieve their financial goals. That could be saving up for a dream car or calculating the right car payment for your budget so you can get a reliable daily driver. I research and write about personal finance so that making great financial choices becomes easier for us all.