An 84-month car loan isn't inherently "bad," but it's often a financially risky choice due to higher total interest paid, increased risk of being "underwater" (owing more than the car's worth), higher interest rates for longer terms, and the potential for large repair bills as the warranty expires on an older vehicle, though it offers lower monthly payments for expensive cars. It can make pricey cars affordable monthly, but typically costs you more long-term and reduces financial flexibility.
You could get out of your current car loan by refinancing, selling your car or by giving it back to your lender as a voluntary repossession. Voluntarily repossessions negatively impact your credit score for up to seven years. Refinancing or selling it might be your best options.
No! neither were 48 month, 60 month or 72 month loans. Car loans in general are a bad idea. Debt is a bad idea, except for your home. Cars are rapidly deprecating value objects and any loan over 48 months runs serious risk of putting you in a negative equity position for all but the last few months of the loan.
Because of the higher interest rates and risk of going upside down, most experts agree that a 72-month loan isn't ideal. Experts recommend that borrowers take out a shorter loan. For an optimal interest rate, a loan term of fewer than 60 months is a better way to go. Learn more about car loans.
The 50/30/20 rule is a simple budget guideline: 50% of your after-tax income for needs (like housing, groceries, and car payments/expenses), 30% for wants (dining out, entertainment), and 20% for savings and debt repayment. For a car payment, this means your total monthly car expenses (loan, insurance, gas, maintenance) should ideally fit within the 50% "Needs" category, with some experts suggesting car costs shouldn't exceed 10-15% of your income overall, making a modest car a "need" and luxury vehicles a "want".
72-Month Car Loan Rates Are Typically High
A high interest rate means you'll end up paying more for the total cost of the car when all is said and done and you've made all your loan payments. Paying more money in interest has no benefit, and some people consider it to be wasted money.
When you hear the term '84 months,' it might sound a bit abstract, almost like a number floating in space. But let's ground that figure into something more relatable: 84 months is equivalent to 7 years. Yes, seven whole years!
84 month loan terms are ridiculous. You'll be underwater on that car for years.
The longer you finance your vehicle, the more value it loses. This can lead to negative equity. Negative equity: Sometimes referred to as being “upside down” on a vehicle, negative equity happens when more is owed on a vehicle than its worth.
To get an 84-month auto loan, you generally need a credit score in the fair (580+) to prime (661+) range, but the best rates go to those with good (670+) or excellent credit, while lower scores (subprime) can still get approved with higher interest rates, larger down payments, or co-signers, as lenders like Credit Unions and some Banks offer these extended terms for various scores, though online lenders focus more on lower terms.
For a $70,000 vehicle, assuming a $10,000 down payment, 5% interest, and 72 months, your payment would be approximately $967 per month.
The Ramsey 25% rule is a personal finance guideline from Dave Ramsey, stating that your total monthly housing costs (mortgage principal, interest, taxes, insurance, HOA, PMI) should not exceed 25% of your monthly take-home pay, preventing you from becoming "house poor" and allowing for savings, investing, and financial freedom. It's a guideline for building a strong financial foundation, not a strict rule, though some find it difficult in high-cost areas.
They Think Long Term. The average car on the road today is over 12 years old, meaning people keep vehicles longer than ever. Wealthy people factor this into their decision-making. If you're planning to keep a car for more than six years, buying almost always makes more financial sense.
It is generally best to avoid 84-month loans, but they might be helpful in certain situations. An 84-month auto loan generally has lower monthly payments but higher total borrowing costs. Before you take out an 84-month car loan, explore all of your options, including waiting until you can afford a higher down payment.
Dave Ramsey's core car rules emphasize paying cash, avoiding new cars (unless you're a millionaire), keeping your total vehicle value under half your annual income, and using a strict budget, often suggesting the 20/4/10 rule (20% down, 4-year loan, 10% total car expenses) as a guideline if financing, but preferring no debt at all to avoid depreciating assets trapping you. He stresses buying reliable, used vehicles to prevent debt and build wealth.
With a $50k salary, you can likely afford a car in the $20,000 to $35,000 range, aiming for monthly payments under $300-$400 (10-15% of your take-home pay) after a 10-20% down payment, and considering reliable models like Hyundai Elantra, Kia Rio, or Honda/Toyota used cars to keep costs low, factoring in insurance, gas, and maintenance.