Here’s How Much More Interest You’ll Pay for a 7-Year Car Loan vs. a 5-Year Loan
Written by
Kathryn Jackson
Edited by
Zuri Anderson
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Longer car loans might make monthly payments feel easier but they could come at a cost. The interest adds up fast, often making the total price of the car thousands higher than expected.
Before signing a seven-year loan, it’s worth seeing how much more you’ll actually pay compared to a five-year term.
A Change in Auto Financing
The beginning of 2025 saw several changes in the numbers related to auto financing. In the second quarter of 2025, an average new car payment rose to $1,000 and the average amount financed was $42,388, according to Edmunds. Annual percentage rate (APR) on new car loans in the second quarter of 2025 was 7.2% compared to 7.1% in the first quarter of 2025.Â
Also, in the second quarter of 2025, roughly one in five new-car buyers stretched their financing to 84 months to afford the increasing cost of a vehicle, Edmunds reported. February’s average transaction price for a vehicle was $48,039, per Cox Automotive, rising to $48,669 in July and $49,077 in August.
A Seven-Year Car Loan vs. a Five-Year Car Loan
Here’s how a seven-year loan compares to a five-year loan based on the average vehicle price of $49,077. Information was generated from U.S. News & World Report’s car payment calculator.
Seven-Year Loan
- Down payment of $4,908
- $0 trade-in value
- 5% estimated sales tax
- 10.81% estimated interest rateÂ
- Total loan amount of $46,623Â
- Monthly payment of $794Â
- Total interest paid (over the life of the loan) $20,043Â
Five-Year Loan
- Down payment of $4,908
- $0 trade-in value
- 5% estimated sales tax
- 10.81% estimated interest rateÂ
- Total loan amount of $46,623Â
- Monthly payment of $1,009Â
- Total interest paid (over the life of the loan) $13,934Â
A seven-year car loan lowers the monthly payment by $215 but costs $6,109 more in interest. While the down payment would be lower, the interest is more costly than compared to the five-year loan. Don’t forget that if your credit is not the best, the APR will be higher and you’ll pay significantly more over the life of the loan.
Keep in mind these are just snapshots of possibility when it comes to car loans. Results will vary based on vehicle cost, credit score, income and personal financial circumstances.
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