New Car Shoppers In America Turning To Seven Year Loans

As the cost of new vehicles has risen sharply in recent years and interest rates remain high, more and more car shoppers are opting for longer loan terms to help reduce monthly payments. In Q1 2025, a whopping 19.8 percent of new car shoppers opted for an 84-month loan, in fact, which was a new record. Trouble is, many those same customers are also upside down on their loans, as 26.6 percent of trade-ins on new car purchases in Q2 2025 had negative equity – the highest such share on record since Q1 2021. Regardless, that isn’t stopping the trend of taking out longer loans.

According to Bloomberg, seven-year (84-month) loans grew in popularity yet again in Q2 2025, representing 21.6 percent of all new vehicle financing. At the same time, six-year or 72-month loans have become the norm, accounting for 36.1 percent of new loans across the second quarter of the year. Some car shoppers are even signing up for eight year terms, though those only represent a tiny fraction of the overall market – at least, for now, at less than one percent.

At the same time, shorter terms are on the decline – five-year terms accounted for 19 percent of new vehicle financing, while four years came in at six percent and three years at four percent. Trouble is, many consumers don’t consider the downsides of these longer loans. One of the biggest pertains to the fact that they’re paying more over the course of the loan, with the average interest paid on an 84-month loan coming in at $15,460 – $4,600 more than the average five-year loan.

“People get wrapped up in thinking, ‘I can afford this right now, and things will get better for my situation, which will make this more affordable,’” said Ivan Drury, director of insights at Edmunds.com. “But while your monthly payments stay the same, your other costs can be variable. And that’s where it can get dangerous, if there’s more inflation once we see tariff costs come through.”