< 1 minute read|Published by FAIRWINDS

Understanding the True Costs of a Lower Monthly Car Payment

Considering an 84-month auto loan? Be cautious about lower monthly payments.

Thinking about buying a car? In addition to finding the right set of wheels, you also have a variety of auto loan terms to choose from.

One loan option that is increasing in popularity is an 84-month auto loan.

What’s not to like? An 84-month auto loan stretches out your repayment over seven years, resulting in a lower monthly payment. But how much are those payments over seven years really costing you?

Before you start shopping and accelerate toward choosing the lower monthly payment, here are pro tips to help steer you in the direction of saving more.

A lower payment doesn’t always mean “better.”

Some dealers will offer financing that provides an affordable monthly payment, but often at the expense of the buyer not truly understanding what the final math means.

“Who doesn’t want the lowest payment for something,” says Bryan Meizinger, FAIRWINDS’ Executive Vice President and Chief Credit Officer. “But not all buyers are necessarily thinking about the actual loan term they are accepting and what a lower payment may mean.”

Check out the example below. Here’s what the difference between making payments for six years versus seven years could mean:

72-Month Loan

84-Month Loan

Total Loan Amount



Interest Rate



Monthly Payment



Total Interest Accrued



*FAIRWINDS rate and savings shown are for illustrative purposes. Your actual rate and savings will vary.

Using these numbers, while your monthly payment would be approximately $44 less a month with the 84-month term, you would pay $2,200 more in interest over the life of the loan.

Why such a big difference in the amount of interest accrued? According to Bryan, “Typically, financial institutions will look at a 72-month car loan interest rate and add a full percentage point in order to offer an 84-month car loan. It costs you more money to borrow for longer periods of time.”

A shorter term with a higher payment saves you more.

True, the shorter the term, the higher the monthly payment. But, if you can manage a shorter-term loan, like 36 or 48 months, you’ll own your car outright sooner. Plus, you can continue to pay yourself first by saving what you would have typically spent on your car payment.

Bryan adds, “When you repay your loan in a short time, like 48 months, your car will likely last you at least several more years. You can have a much more significant impact on growing your savings by keeping your car once the loan is paid off and making those payments to yourself.”

Final Tips Before You Shop

Consider the total cost, not just the monthly payments. As you’re making your decision, look at your budget and figure out what you can comfortably afford without stretching yourself too thin. Another option to save could include buying less of a car. If you have to finance a car for a longer term, consider buying a used car or a lower-cost option.

See how much you could save in interest with other shorter-term loans by using our Auto Loan Payment Calculator. That way, you’ll know your estimated monthly payment and how much you’ll pay over the life of the loan so you can make an informed decision.

“It always makes sense to choose the shorter term,” says Bryan. “You keep more of your money.”