When buying a used car, understanding your financing options is crucial for making a sound financial decision. The length of your car loan affects everything from your monthly payment to the total interest paid over time. Whether you’re looking to minimize monthly costs or save on interest, knowing how long you can finance a used car helps you choose the right loan for your situation.
In this guide, we’ll explore typical used car loan terms, factors that influence loan duration, and strategies to secure the best financing for your needs.
Quick Answer: How Long Can You Finance a Used Car?
You can usually finance a used car for 36 to 72 months (3-6 years). Some lenders may offer terms up to 84 months (7 years) depending on the car’s age, mileage, and your credit score. Older vehicles typically qualify for shorter loan terms, while newer used cars may be eligible for longer financing periods.
Average Used Car Loan Terms
The most common loan terms for used vehicles range from 36 to 72 months, with 60 and 72-month loans being particularly popular. According to recent automotive finance market data, the average used car loan term is approximately 67 months.
Here’s how different loan terms affect your monthly payment for a typical used car purchase:
| Loan Term | Monthly Payment (on $20,000 loan at 6.5%) | Total Interest Paid | Total Cost |
| 36 months (3 years) | $612 | $2,032 | $22,032 |
| 48 months (4 years) | $474 | $2,752 | $22,752 |
| 60 months (5 years) | $391 | $3,460 | $23,460 |
| 72 months (6 years) | $337 | $4,264 | $24,264 |
| 84 months (7 years) | $299 | $5,116 | $25,116 |
As you can see, longer loan terms result in lower monthly payments but significantly higher total interest costs. This trade-off is important to consider when choosing your loan term.
Factors That Affect How Long You Can Finance a Used Car
Several key factors determine the maximum loan term available for your used car purchase:
Vehicle Age and Mileage
Older vehicles with high mileage typically qualify for shorter loan terms. Many lenders won’t offer terms longer than 48-60 months for cars older than 5 years or with more than 100,000 miles. This is because older vehicles pose a higher risk of mechanical problems and depreciation.
Your Credit Score
Borrowers with higher credit scores typically qualify for longer loan terms and better interest rates. If your credit score is below 660, you may be limited to shorter terms or face higher interest rates on longer loans. Lenders view long-term loans for borrowers with lower credit scores as higher risk.
Loan-to-Value Ratio
The loan-to-value (LTV) ratio compares your loan amount to the vehicle’s value. A lower LTV (meaning a larger down payment) may help you qualify for longer loan terms. Most lenders prefer an LTV of 80% or less for the most favorable terms.
Lender Policies
Different lenders have varying policies regarding used car loan terms. Banks typically offer terms up to 72 months, credit unions might extend to 84 months for newer used cars, and some online lenders specialize in longer-term financing options.
Know Where You Stand
Your credit score significantly impacts the loan terms you can qualify for. Check your score for free and see what rates you might be eligible for.Check Your Credit Score
Pros and Cons of Long-Term Used Car Financing
Before committing to a longer loan term, it’s important to understand the advantages and disadvantages:
Advantages of Longer Terms (60-84 months)
- Lower monthly payments make budgeting easier
- Ability to purchase a higher-quality vehicle
- More cash flow available for other expenses or investments
- Easier qualification with lower payment-to-income ratio
- Flexibility to make extra payments when possible
Disadvantages of Longer Terms (60-84 months)
- Significantly higher total interest costs
- Higher risk of negative equity (owing more than the car is worth)
- Car may need expensive repairs while you’re still making payments
- Higher interest rates compared to shorter-term loans
- Longer commitment to an aging vehicle
The “sweet spot” for many buyers is a 48 or 60-month loan, which balances manageable monthly payments with reasonable total interest costs. However, your specific financial situation may make a different term length more appropriate.
When Short-Term Financing Makes Sense
While longer terms are popular, shorter loan periods (36-48 months) offer significant advantages in certain situations:
Older Vehicles
For vehicles over 5 years old, shorter terms align better with the car’s remaining useful life. This reduces the risk of making payments on a car that’s no longer reliable.
Strong Financial Position
If you have stable income and low debt, shorter terms save substantial money on interest while building equity faster. The higher monthly payment may be worth the long-term savings.
Frequent Car Upgraders
If you typically replace your vehicle every 3-4 years, shorter loans help you build equity faster, putting you in a better position when it’s time to trade in or sell.
“The cheapest way to buy a car is to pay cash, but if you need financing, the next best option is usually the shortest term you can comfortably afford.”
— Financial advisor recommendation
Tips to Get Better Used Car Financing Terms
Follow these strategies to secure more favorable loan terms for your used car purchase:
Before Applying:
- Check and improve your credit score – Pay down existing debt, correct errors on your credit report, and avoid applying for new credit before seeking auto financing.
- Save for a larger down payment – Aim for at least 20% down to reduce your loan-to-value ratio and potentially qualify for better terms.
- Research current interest rates – Know what rates are competitive for your credit profile before shopping for loans.
- Consider certified pre-owned (CPO) vehicles – These often qualify for better financing terms than standard used cars.
When Applying:
- Shop multiple lenders – Compare offers from banks, credit unions, online lenders, and dealerships.
- Get pre-approved – Secure financing approval before visiting dealerships to strengthen your negotiating position.
- Focus on total cost – Don’t fixate only on monthly payment; consider the total interest paid over the life of the loan.
- Negotiate the interest rate – Even small rate reductions can save hundreds or thousands over the loan term.
Compare Loan Options
Shop and compare used car loan rates from multiple lenders to find your best option.Compare Used Car Loans
Where to Finance a Used Car
Different financial institutions offer varying terms for used car loans. Here’s what to expect from each type of lender:
| Lender Type | Typical Maximum Term | Advantages | Disadvantages |
| Banks | 72 months | Established relationships, potential customer discounts | Stricter qualification requirements, potentially higher rates |
| Credit Unions | 84 months | Lower interest rates, more flexible terms | Membership requirements, limited branch locations |
| Online Lenders | 72-84 months | Convenient application, fast approval, competitive rates | Varying reputation, potential for higher rates with lower credit |
| Dealership Financing | 72 months | Convenience, potential for manufacturer incentives | Often higher interest rates, less transparency |
| Buy Here, Pay Here Dealers | 36-48 months | Options for poor credit, no credit check | Very high interest rates, limited vehicle selection |
Credit unions typically offer the most favorable terms for used car loans, with interest rates averaging 1-2 percentage points lower than banks. However, online lenders have become increasingly competitive, especially for borrowers with good credit scores.
Frequently Asked Questions About Used Car Financing
Can you finance a 10-year-old car?
Yes, you can finance a 10-year-old car, but your options will be more limited. Most traditional lenders cap used car loans at 7-10 years of vehicle age. For older vehicles, you may need to consider:
- Credit unions, which tend to be more flexible with older vehicles
- Shorter loan terms (typically 24-36 months maximum)
- Higher interest rates to offset the increased risk
- Personal loans instead of auto loans (though these typically have higher rates)
Some specialized lenders and “buy here, pay here” dealerships may finance older vehicles, but often at significantly higher interest rates.
Is 84 months too long to finance a used car?
An 84-month (7-year) loan is generally considered too long for most used car purchases. While the lower monthly payment may be appealing, these extended terms come with significant drawbacks:
- You’ll likely be “underwater” (owing more than the car is worth) for most of the loan term
- The vehicle may require expensive repairs while you’re still making payments
- You’ll pay substantially more in total interest
- Higher interest rates typically apply to these longer terms
An 84-month loan might make sense only for newer used cars (1-3 years old) that you plan to keep for many years, and only if you get a very competitive interest rate.
Can I refinance my used car loan?
Yes, refinancing a used car loan is possible and can be beneficial in certain situations:
- If your credit score has improved since the original loan
- If interest rates have dropped significantly
- If you want to change your loan term (shorter to save money or longer to reduce payments)
- If you’re unhappy with your current lender’s service
The best time to refinance is typically 6-18 months after the original loan, assuming your payment history has been positive. Keep in mind that older vehicles or those with high mileage may be harder to refinance.
What’s the minimum credit score needed for used car financing?
While there’s no universal minimum credit score for used car financing, most traditional lenders prefer scores of 660 or higher for the best rates and terms. However, options exist across the credit spectrum:
- 740+ (Excellent): Best rates and terms, including longest loan options
- 700-739 (Good): Competitive rates, multiple term options
- 660-699 (Fair): Approved with slightly higher rates, possibly shorter maximum terms
- 600-659 (Poor): Limited options, higher rates, larger down payment may be required
- Below 600: Specialized subprime lenders, significantly higher rates, shorter terms
Remember that credit score is just one factor; income, debt-to-income ratio, and down payment also significantly impact approval and terms.
Making the Right Decision on Used Car Financing
How long you should finance a used car depends on your specific financial situation, the vehicle’s age and condition, and your long-term ownership plans. While longer terms offer lower monthly payments, shorter terms typically provide better overall value and financial security.
For most used car purchases, aiming for a 48 or 60-month loan represents a good balance between affordable monthly payments and reasonable total costs. Whatever term you choose, be sure to shop around for the best rates, make the largest down payment you can comfortably afford, and consider the total cost of ownership beyond just the monthly payment.
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