How Long Can You Finance a Used Car?

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How Long Can You Finance a Used Car

So, you’re in the market for a pre-owned vehicle, a smart choice to save some cash compared to splurging on a brand-new set of wheels. But now, you’re contemplating financing and you’ve got a question: how long can you finance a used car?

Read on to discover everything from how long you can finance a used car to interest rates and more so that you can make a well-informed decision that fits your budget and driving needs. 

Understanding the maximum financing period for a used car

The maximum financing period isn’t set in stone. It’s more like a flexible rubber band that can stretch or shrink depending on various factors.

It depends on a few things like the lender’s policies, the car’s age and condition, and your creditworthiness.

 Keeping tabs on your credit score can also help you score better rates and get you closer to that sweet ride.

PRO TIP! Building your credit is easier than you think. It starts with knowing and understanding your score, creating goals, and then monitoring your credit as you take steps to build it

Typically, lenders offer financing terms ranging from 36 to 72 months for used cars. Keep in mind that longer financing periods may lead to higher interest rates, so you’ll end up paying more. 

Types of used car financing

You can find several types of used car financing options, each with its own set of advantages and disadvantages.

1. Dealership financing

Dealership financing is when you obtain a car loan directly from the dealership where you’re purchasing the vehicle.

  • Usual rates: Dealerships may offer a range of interest rates, often influenced by your credit score. Rates can vary but are typically competitive.
  • Advantage: Convenience is a major advantage of dealership financing since you can secure a loan and purchase the car in one place.
  • Disadvantage: Sometimes, dealership financing rates may be slightly higher than those from other lenders.

2. Online lender

  • Online lenders provide financing through digital platforms.
  • Usual rates: Rates can vary widely among online lenders, and they often cater to a range of credit profiles.
  • Advantage: Online lenders offer convenience and may be more accessible to individuals with diverse credit histories.
  • Disadvantage: Some online lenders may charge higher interest rates, and it’s important to carefully research and compare offers.

MoneyLion offers a service to help you find personal loan offers based on the info you provide, you can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different online lenders and choose the best offer for you. You can also use the loan funds to pay off other existing debts.

3. Credit union loans

  • Credit union loans are offered by member-owned financial cooperatives.
  • Usual rates: Credit unions typically offer competitive rates and may be more willing to work with individuals with less-than-perfect credit.
  • Advantage: Credit unions often have a more personalized approach and may offer lower interest rates than traditional banks.
  • Disadvantage: Membership requirements may apply, and access to credit union loans may be limited to members.

4. Bank loans

  • A bank loan for a used car is obtained from a traditional bank.
  • Usual rates: Rates for bank loans can be competitive, particularly if you have a good credit history. Rates can vary based on the bank and your creditworthiness.
  • Advantage: Banks often provide flexibility in loan terms and may offer lower interest rates for those with good credit.
  • Disadvantage: The creditworthiness requirements can be stricter

Short vs. long loan terms for a used car: Which is better?

Every situation is unique so it’s always best to fully understand the options available to you.

Short loan terms for a used car

Short loan terms typically refer to loans with a repayment period of three to five years.

  • The pros of short loan terms are like sprinting to the finish line: you pay less interest over the life of the loan, the car will have less time to depreciate while you are paying the loan, and become debt-free sooner. It’s like a financial power workout.
  • The cons, though, are a bit like the sprinter’s burnout. Monthly payments can be higher, potentially straining your budget. But remember, it’s a short, intense race to debt freedom.

Long loan terms for a used car 

Long loan terms stretch out over six or more years, like a marathon for your finances.

  • The pros of long loan terms are the lower monthly payments, which can make your budget breathe easy. But beware, this marathon has some uphill climbs.
  • The cons are like the long, winding road: you pay more in interest over time, and the car may depreciate faster than you’re paying it off. It’s the slow and steady approach, but it could cost you in the long run.

How to determine the ideal loan term for a used car

Finding the Goldilocks loan term for your used car — not too short, not too long — is crucial. Here’s how to determine the ideal loan term.

1. Consider your budget

The first step is to assess your financial situation. Be realistic about how much you can comfortably allocate to a car payment each month. Remember, this amount should fit comfortably within your overall budget without causing financial strain.

2. Monthly payment affordability

Your ideal loan term depends on what you can afford each month. Shorter terms mean higher monthly payments, while longer terms result in lower monthly obligations. Choose a term where the monthly payment aligns with your budget without sacrificing other financial priorities.

3. Interest rate

The interest rate you qualify for can significantly impact your loan term choice. Lower rates may make shorter terms more affordable, while higher rates might necessitate a longer term to keep payments manageable. Shop around for the best interest rate options.

4. Total loan cost

Consider the total cost of the loan over its term. Shorter terms may have higher monthly payments but lower overall interest costs, resulting in a lower total cost. Longer terms can have lower monthly payments but may result in higher overall expenses due to more interest.

5. How quickly you want to pay off the loan

Determine your financial goals. If you aim to own the car outright as soon as possible and can afford higher monthly payments, a shorter loan term may be preferable. If you’re comfortable with a more extended commitment and prioritize lower monthly payments, a longer term could be the way to go.

A Loan Term That Works for You

When it comes to the length of a typical used car loan, it’s often around five years. Think of it as the middle ground, not too short and not too long.

Shorter loan terms mean larger monthly payments. Longer terms offer smaller monthly payments.

But remember, it’s your financial journey, and you get to choose the pace. Whether you prefer a quick sprint or a steady stroll, pick the loan term that suits your wallet and your style. 


Can I refinance my used car loan to extend the term?

Yes, you can often refinance your used car loan to extend the term. It can result in lower monthly payments, but keep in mind that you may end up paying more in interest over the life of the loan.

Are there any penalties for paying off a used car loan early?

Some lenders do charge prepayment penalties, so it’s crucial to check your loan terms. However, many loans don’t have these penalties, allowing you to pay off your loan early without extra charges.

Can I change the loan term after signing the contract?

Changing the loan term after signing the contract is typically not straightforward. The terms are usually agreed upon when you sign, but it’s worth discussing with your lender to explore possible options.

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