Cars are so expensive that buyers need seven-year loans

Seven-year auto loans, once considered unusual, are now becoming commonplace as rising vehicle prices push buyers toward longer financing terms. With average new-car prices nearing $50,000—about 28% higher than five years ago—many consumers are finding that stretching payments over seven years is the only way to make monthly costs manageable. Compared with a five-year loan, a seven-year term can lower a typical monthly payment from $1,000 to around $780. In the second quarter of 2025, these loans accounted for 21.6% of all new-vehicle financing, while six-year loans—now the most common—made up 36.1%. A small but growing number of buyers are even opting for eight-year loans.

Analysts note that loan length is often the only variable buyers can adjust when negotiating payments. “The only lever you really have is the term,” said Tyson Jominy, senior vice president of analytics at J.D. Power. But the trade-off is significant. Longer loans slow equity-building, making it harder for buyers to replace their vehicles, which also impacts dealerships that rely on repeat sales. Customers are more likely to end up “upside down”—owing more than the car is worth—when they eventually trade in. Dealers like Mike Schwartz of Galpin Motors say they try to steer customers away from ultra-long loans for that reason.

Extended financing also increases the total cost of ownership. Edmunds.com reports that an 84-month loan racks up an average of $15,460 in interest—about $4,600 more than a traditional five-year loan. Ivan Drury of Edmunds warns that buyers often assume their financial situations will improve, making the loan easier to bear, but rising living expenses or added costs from tariffs could create risks even if car payments stay the same.

Shorter-term loans still exist, but they are increasingly concentrated among wealthier buyers who can afford large down payments. Five-year loans now represent about 19% of auto financing, while four-year and three-year loans account for 6% and 4%, respectively. For most Americans, however, the trend is clear: longer loans are no longer an exception but a necessity in today’s expensive auto market.