Before Taking a 72-Month Car Loan, Here's What Buyers Need To Know in 2026
A 72-month car loan can make a car seem more affordable by lowering the monthly payment. But the lower payment often comes with big trade-offs, including more interest, slower equity-building and a higher chance of ending up underwater on the loan.
“The intent of attractive car loans (as well as extended warranties) is to remove/ease sale barriers, in this case, financial barriers,” said Arie Brish, university professor, investor, and founder and CEO of CXO360.
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Shopping for a used car in 2026? Here’s what you need to know about lengthy car loans.
Long Auto Loan Terms Are More Expensive
On a car loan, you pay more in interest at the beginning because your interest is calculated based on your remaining balance. This process also front-loads interest, called amortization, so more of your monthly payment goes toward interest at first and principal later.
“Add a high APR, and your balance barely moves while the car's value drops,” explained Simon Goodall, CEO of auto refinancing platform Caribou.
“Take a 72-month, $32,000 loan. At 8%, you've paid off 44% of the principal after three years. At 18%, you've paid off only 37%,” he explained, “That seven-point gap, roughly $2,300, is the difference between equity and being underwater.”
And this is where the term really matters, according to Goodall.
“On a 60-month loan at the same 18% rate, you've paid off 49% in three years, more than the 8% borrower on a 72-month term. A shorter term can outweigh a higher rate," he said.
A lower rate can also help you save on interest and pay down the loan faster, which keeps you above water.
The Risk of Being Underwater
“With [the] value of used cars falling rapidly during early life of the vehicle, long car loans will create a situation where your loan balance is greater than the value of the vehicle when you choose to sell it ... This situation is called ‘being underwater,’” Brish explained.
Depreciation also works quickly. According to Goodall, age and additional miles only accelerate the drop in the car’s value.
“The real damage happens at trade-in. Edmunds reported the average underwater borrower in Q1 2026 owes $7,183 more than the car is worth,” Goodall said.
Most borrowers don’t wait and pay it off. Instead, they trade it in and roll what’s owed into the new loan.
“The minute they drive off the lot, they're $10,000 plus underwater, usually with a higher payment than the one they were trying to escape,” Goodall explained.
Warning Signs To Look Out For
Michael A. Klitzke, attorney and CEO at Auto Law Firm, recommended avoiding 72-month auto loans altogether.
“They are attractive because the monthly payment is lower, but the amount of interest that accrues on a loan that long is really terrible,” he explained. “Lowering a monthly payment by $20-$40 might sound good, but it is going to add thousands of dollars to the total cost of purchase.”
But if you do agree to a 72-month car loan, Goodall said it’s important to understand the loan term, not just the payment. He also recommended checking your credit score to see what rates you qualify for before walking into the dealership, budgeting for repairs alongside the payment and being honest about how long you’ll want the car.
“If you'll trade in three years, you'll almost certainly be underwater when you do, and you're right back in the cycle,” Goodall explained.
Financing Alternatives
According to Goodall, the simplest answer is to buy a cheaper car. A lower price, smaller loan and shorter loan term may be more realistic for your budget. And if you want a new car every few years, he recommended leasing.
“As long as you maintain it, you can't be underwater on a lease,” he explained.
If you’re already in a long-term loan, you can also refinance. At a minimum, Goodall also recommended GAP coverage.
“If the car is totaled, GAP pays the difference between what you owe and what the car is worth,” he said. “Without it, that gap is yours, and it can be crippling if you don't have the cash to cover negative equity.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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