Yes, there are seven year auto loans. An 84 month car loan is usually only offered on a new car and is reserved for people who have excellent credit, but loosening lending guidelines have been making it easier for lower credit scores to get a loan of that length. Even if you qualify for a seven year auto loan, should you finance a vehicle for that long?
New cars always come with some negative equity. That negative equity is the result of the depreciation that begins the instant you finance the vehicle. Lenders expect it to happen to some degree, but know that the value will equalize as you make payments. With longer loans, the negative equity will linger, causing some lenders to require you to carry gap insurance for the first year or two.
In addition to the additional insurance burden, you will be paying an excessive amount of interest over the course of a seven year auto loan. Below you can see how the total interest compares when you finance $20,000 at 7 percent for several loan terms.
- 5 year loan…$3,761.44
- 6 year loan…$4,550.57
- 7 year loan…$5,355.70
A third consideration to keep in mind with a seven year car loan is that you will still have monthly payments when the vehicle reaches an age when it may begin to need repairs. It is not unusual for a vehicle to reach 100,000 miles after five years of normal driving. That mileage range may open the door to major repairs and is when some of the more expensive recommended maintenance issues are due. This means you could, effectively, begin taking on a monthly repair payment in addition to your car payment. The hope, for many consumers, is that their income will have increased over the seven years it takes to pay off the car, meaning they will be able to afford the extra costs. However, that does represent a risk.
In the end, your question should not be whether seven year auto loans are available, but whether a seven year car loan makes good financial sense. You should only opt for such lending terms if you can offer a 20% down payment, you plan to drive the vehicle until it is paid off (no trading in), and you expect your income to rise over the next 84 months.