How Long Does It Usually Take to Pay Off a Car?
Understand the typical timeframe for car loan repayment and the crucial elements that determine your payoff speed and overall cost.
Understanding how long it takes to pay off a car is a common concern for consumers. This knowledge helps individuals plan their finances more effectively and clarifies what to expect when taking on automotive debt.
Standard Car Loan Terms
Car loans are structured over various standard durations, or terms, measured in months. Common loan terms available in the market include 36, 48, 60, 72, and 84 months. These terms represent the agreed-upon period over which a borrower is scheduled to repay the total amount borrowed, plus interest.
According to Experian data from the first quarter of 2025, the average auto loan term for new cars was approximately 68.63 months, while for used cars, it was about 67.22 months. This indicates that many borrowers are opting for terms around six years. While 60 and 72 months are quite prevalent, longer terms like 84 months are also becoming more common.
Factors Affecting Your Car Loan Payoff
Several key variables directly influence the time it takes to pay off a car loan. The loan principal, the total amount borrowed for the vehicle, directly impacts the repayment timeline. This amount includes the vehicle’s price along with any applicable fees and taxes that are financed.
The size of your down payment plays a significant role in shortening the payoff period. A larger upfront payment directly reduces the loan principal, meaning you borrow less overall. This action can lead to lower monthly payments or allow for a shorter loan term without substantially increasing the monthly obligation. Making a substantial down payment also reduces the risk for the lender, potentially leading to more favorable loan terms, including a lower interest rate.
The interest rate applied to your loan also affects the payoff duration and the total amount paid. A higher interest rate means a larger portion of each payment goes towards interest rather than reducing the principal balance. Conversely, a lower interest rate allows more of each payment to reduce the principal, accelerating the payoff. Lenders determine interest rates based on factors such as your credit score, income, and the loan term itself.
The initial loan term chosen by the borrower sets the scheduled repayment timeline. Selecting a 60-month loan means the loan is designed to be paid off in five years, while an 84-month term extends this period to seven years. Borrowers can proactively shorten their payoff time by making additional payments. Consistently paying more than the minimum required amount directly reduces the principal balance faster, which in turn reduces the total interest accrued over time and allows for an earlier loan completion.
Refinancing the car loan can alter the original payoff schedule. By securing a new loan with a lower interest rate or a shorter term, borrowers can potentially reduce their total interest costs and accelerate their debt repayment. This strategy can be particularly beneficial if your credit score has improved or if market interest rates have decreased since the original loan was originated. Refinancing effectively replaces the old loan with new terms, which can be tailored to achieve a faster payoff.
The Impact of Loan Length on Your Finances
The length of a car loan significantly influences various aspects of a borrower’s financial situation. Shorter loan terms result in higher monthly payments. For instance, a $35,000 loan at 9% APR would have a monthly payment of $727 over 60 months, but $631 over 72 months, and $563 over 84 months. Conversely, longer terms provide lower monthly payments, making the vehicle seem more affordable on a month-to-month basis. This allows for more flexibility in a monthly budget.
A longer loan term leads to a substantially greater amount of total interest paid over the life of the loan. For the same $35,000 loan at 9% APR, the total interest paid could be $8,593 over 60 months, but would increase to $10,424 over 72 months, and $12,302 over 84 months. This increased interest cost makes the overall vehicle purchase more expensive.
Longer loan terms also delay the point at which a borrower builds equity in their vehicle. Equity represents the difference between the car’s current market value and the outstanding loan balance. Since vehicles generally depreciate rapidly, especially in the initial years, a longer loan term can lead to a period of negative equity, often referred to as being “upside down” or “underwater.”
Being in a negative equity position can complicate selling or trading in the car, as the borrower would need to pay the difference between the sale price and the loan balance. A shorter loan term, coupled with a larger down payment, helps to build equity faster, reducing the risk of being upside down on the loan.