# Car Loan: 48, 60, or 72? **URL:** \ **Category:** Factual Questions\ **Created:** [February 3, 2010, 10:30pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594 "2010-02-03T22:30:57Z")\ **Posts on this page:** 13\ **Page:** 2
**Author:** ![Hampshire](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hampshire/32/4887_2.png) [@Hampshire](https://boards.straightdope.com/u/Hampshire)\ **Post date:** [February 4, 2010, 7:41pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/21 "2010-02-04T19:41:40Z")
It’s good that you know what rates your bank is offering at 48, 60, and 72 month terms. However, now that you have this information you can use it at the dealer. Negotiate the price of the car first telling them that you have secured your own financing. Once the price for the vehicle is settled upon and in writing you can offer the dealers financing department a opportunity to beat the rates that your bank offers. 9 times out of 10 they will beat the bank rates. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [February 4, 2010, 11:28pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/22 "2010-02-04T23:28:39Z")
The faster you pay off the loan, the less total interest you pay. (If all loans are same rate). The key question - is there a penalty for paying off faster? Or is it a straight monthly interest on balance calculation? What are the payment requirements? Do you have to pay $X a month until the balance is 0, or just stay on schedule -You paid (5X) ahead, so they won’t bother you for 5 months? I suspect the former - just regular scheduled payments, plus whatever you ask to pay down against the principal? If you aren’t coming out ahead, why pay it down? Use the money for something else that makes more sense until the payment is due. OTOH, select the big payment, short loan - and you can always refinance later if there is a problem fiscally. This can be a substitute for willpower. ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [February 5, 2010, 2:41pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/23 "2010-02-05T14:41:58Z")
I don’t mean to hijack, but how common are early payment penalties? I can think of only one time I’ve ever _almost_ had one, and we negotiated that out of the home equity loan deal. But for standard auto financing? I’ve had… eight auto loans in my life, and all but one I’ve always paid off early with no early payment penalty. ---
**Author:** ![Lanzy](https://avatars.discourse-cdn.com/v4/letter/l/74df32/32.png) [@Lanzy](https://boards.straightdope.com/u/Lanzy)\ **Post date:** [February 5, 2010, 3:24pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/24 "2010-02-05T15:24:58Z")
> [@Balthisar](#): > > I don’t mean to hijack, but how common are early payment penalties? I can think of only one time I’ve ever _almost_ had one, and we negotiated that out of the home equity loan deal. But for standard auto financing? I’ve had… eight auto loans in my life, and all but one I’ve always paid off early with no early payment penalty. I personally haven’t seen any early payoff penalties since the '70s. I’m sure some shady places still have them, but hopefully everyone here knows better than to sign up for a loan that has one. My last 2 cars have been 0% and I took the longest time offered to pay them off, hoping raises and inflation would actually make the later years payment easier, why spend my cash now with no interest at all? ---
**Author:** ![Bearflag70](https://avatars.discourse-cdn.com/v4/letter/b/8e7dd6/32.png) [@Bearflag70](https://boards.straightdope.com/u/Bearflag70)\ **Post date:** [February 5, 2010, 3:50pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/25 "2010-02-05T15:50:43Z")
> [@Bearflag70](#): > > No. I didn’t have that kind of cash in a lump sum. > > ETA: Upon further reflection, though, I may have been able to pay it off faster than I did, but I elected not to. Not sure I could have paid it off in 3 years though. So, was it still not a good idea to buy that my car since I couldn’t pay it off in 3 years or less? ---
**Author:** ![Hockey\_Monkey](https://avatars.discourse-cdn.com/v4/letter/h/a183cd/32.png) [@Hockey\_Monkey](https://boards.straightdope.com/u/Hockey_Monkey)\ **Post date:** [February 5, 2010, 9:40pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/26 "2010-02-05T21:40:53Z")
> [@jtgain](#): > > I put this here because I believe that it has an answer. I’m not looking for an opinion, just trying to see if I understand how loans are structured. > > If I took out a 72 month auto loan, yet paid the 48 month payment, would it be paid off in 48 months? (assuming no pre-payment penalty) > > If so, then it seems to me that it would be wise to take out the loan for 72 months, make the 48 month payment, and then if Something Bad happens, I could make the smaller payment to remain current. > > And, again, if this is still correct, why doesn’t everyone do this instead of taking a shorter term loan? The answer to your question is yes. In the state I’m in (NC). If you take out a simple interest loan for 72 months, but make the payment for a 48 month loan at the same interest rate, you will pay off the loan in 48 months. The interest isn’t frontloaded on a simple interest loan. If you can get a 72 month loan for the same interest rate as the 48 month, then yes you can have a What if Something Bad Happens plan. More often than not, the interest rate for longer terms is higher. Hockey Monkey (Auto Finance Contractor) ---
**Author:** ![muttrox](https://avatars.discourse-cdn.com/v4/letter/m/a8b319/32.png) [@muttrox](https://boards.straightdope.com/u/muttrox)\ **Post date:** [February 5, 2010, 9:52pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/27 "2010-02-05T21:52:23Z")
> [@jtgain](#): > > And, again, if this is still correct, why doesn’t everyone do this instead of taking a shorter term loan? Primarily ignorance. Most people are so unsophisticated they don’t understand the options and the financial consequences of their choices. Of those who do understand the options, some choose the shorter term because they want to psychologically box themselves in. Many people believe that they will not have the financial self-discipline to pay the extra amount each month, and this way they force themselves to pay it off the way they should. (Or the way their current self thinks they should. You know what I mean.) ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [February 6, 2010, 5:55am UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/28 "2010-02-06T05:55:50Z")
I support what **Hampshire** said. The rates may be the same for each term _on paper_, but the real costs are hidden. For example, the dealer may get a kickback from the finance company if they bring in a loan of a certain length, and if you choose it, the dealer will be willing to move a little on the price. In other words, the best price you can get for the vehicle may vary based on the loan term you pick. Or, if you choose the 72 month loan, they may insist that you have to buy an extended warranty, which is almost certainly a ripoff. I don’t know that this is the case, but I’ve dealt with enough of these pseudo-scams from car dealers that I _never_ deal with them on any kind of package (including financing, including a trade-in, etc). Stay with the basics, negotiate your best price, THEN talk about financing and trade-in. Get the first price in writing first, and make them add “No additional fees or charges”, or at least make them detail the additional fees, in writing, before you move on to the financing. If you decide on financing, demand to see those costs broken out to make sure there are no hidden fees on the 72 month term to build up a hidden interest rate. Get the rate from them, then run it through an amortization calculator at home to make sure the numbers add up. I may sound a little paranoid about this, but I’ve gotten that way through long experience with car dealers from all the major manufacturers. ---
**Author:** ![GameHat](https://avatars.discourse-cdn.com/v4/letter/g/ed655f/32.png) [@GameHat](https://boards.straightdope.com/u/GameHat)\ **Post date:** [February 6, 2010, 8:06am UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/29 "2010-02-06T08:06:28Z")
> [@Crafter\_Man](#): > > My personal opinion: if you cannot pay off the car in three years or less, you have no business owning the car. > > FWIW, I have never had a car payment in my life. I always buy used and pay cash. It’s the best way to go, really. Unless you’re just out of school, have little cash on hand and a POS beater isn’t gonna cut it for the job you went to school for. If you ever have to even drive a customer to lunch, the boss ain’t gonna allow it if you are rolling a 1992 Ford Festiva. Sorry. My particular company has written rules for allowable cars (and manufacture year) for even the entry level guys if they’re in sales (I’m talking professional sales, you have a degree in something related to our product or a business degree). Sure, you still get to expense the miles - that’s only fair. But the days of “company cars” ended, at least for us, 5 years ago. Lucky me, I’m exmpt from this because I’m in the R&D side. ---
**Author:** ![Gary\_Robson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gary_robson/32/3448_2.png) [@Gary\_Robson](https://boards.straightdope.com/u/Gary_Robson)\ **Post date:** [February 7, 2010, 3:31am UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/30 "2010-02-07T03:31:36Z")
> [@Crafter\_Man](#): > > My personal opinion: if you cannot pay off the car in three years or less, you have no business owning the car. > > FWIW, I have never had a car payment in my life. I always buy used and pay cash. It’s the best way to go, really. [mod note] This is GQ, and your response is confrontational without helping to answer the question. Please don’t do that. [/mod note] ---
**Author:** ![Iridescent\_Orb](https://avatars.discourse-cdn.com/v4/letter/i/9de053/32.png) [@Iridescent\_Orb](https://boards.straightdope.com/u/Iridescent_Orb)\ **Post date:** [February 7, 2010, 7:26am UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/31 "2010-02-07T07:26:03Z")
> [@muttrox](#): > > Of those who do understand the options, some choose the shorter term because they want to psychologically box themselves in. Many people believe that they will not have the financial self-discipline to pay the extra amount each month, and this way they force themselves to pay it off the way they should. (Or the way their current self thinks they should. You know what I mean.) This is a good point. Few people have the discipline to make more than the minimum payments every month. Thus, “no prepayment penalties” sounds like a good selling point for a loan, but in reality it is a seldom used feature. With that in mind, I recommend going for the shortest term you can reasonably manage. ---
**Author:** ![muttrox](https://avatars.discourse-cdn.com/v4/letter/m/a8b319/32.png) [@muttrox](https://boards.straightdope.com/u/muttrox)\ **Post date:** [February 8, 2010, 1:08pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/32 "2010-02-08T13:08:20Z")
The exact same psychology applies to mortgages as well. Rather than get a 20-year loan (for example), you would be better served to get a 30-year loan, but make the same payments as if it was a 20-year loan. ---
**Author:** ![Mama\_Zappa](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@Mama\_Zappa](https://boards.straightdope.com/u/Mama_Zappa)\ **Post date:** [February 8, 2010, 1:39pm UTC](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594/33 "2010-02-08T13:39:48Z")
> [@muttrox](#): > > The exact same psychology applies to mortgages as well. Rather than get a 20-year loan (for example), you would be better served to get a 30-year loan, but make the same payments as if it was a 20-year loan. Exactly! Though in the case of a mortgage, the interest rate may be low enough to make a substantial difference in the amount paid even if you do so. [Previous page](https://boards.straightdope.com/t/car-loan-48-60-or-72/527594.md?page=1)