When it comes to the length of your loan, you have plenty of options. You can get a 12 month loan all the way up to a 60 month loan. The exact loan length you choose is up to you. Each option has pros and cons. Let me go through a few of them here.
With a short loan your payments will be very high. Can you afford these high payments? Use a car loan calculator to input some sample numbers. Vary the length of the loan and see how the payments change when you later the loan length. If you opt for a short loan, keep in mind that while you think you can afford the payments now, you’ll need to be able to continue making those payments for the entire length of the loan as well.
A 36 month loan (3 years) is the middle option. This option is preferred by many because the payments are not as high as with a short one or two year loan. Yet at the same time you are not tying your credit up for five years. Another benefit of the 36 month auto loan is that if you find that the payments are easy and you have extra money, you can pay extra and get your loan paid off quicker.
The 60 month option is often times not chosen, but rather forced upon the borrower. To those with low incomes or less than stellar credit, this could be their only option. The 60 month car loan has the lowest monthly payment, yet it has the highest interest rates. While you may think you’re getting a good deal since your payments are low, you won’t feel that way years later when you’re still making payments. It’s also not a good feeling to know that you paid an extra thousand dollars (or more) just in interest payments.