In the early 1980’s, Chrysler began offering longer new vehicle warranties. Their competition quickly followed suit. Build quality improved drastically and as a result, financing the vehicles over a long period of time became feasible for the banks. As a result of better build quality and longer warranties the car of your dreams might become a reality. Let’s compare five and seven year loan terms, you’ll be shocked to see the difference two years can make! The cost of the vehicle you want to buy | Your term period | Interest rate2 | Your monthly payments | $25,000 | 5 years | 7.50 | $500 | $25,000 | 7 years | 8.00 | $390 |
*Chart is for illustrative purposes only. Example assumes term equals amortization.
As you can see, a seven-year term can lower your monthly payments to make the vehicle you want more affordable. Do you have a monthly budget in mind? Do you want to get the most for your money? Choosing a longer term loan can allow you to buy a more expensive vehicle for the same monthly cost as a lower-priced one. What’s great is that you can use the extra purchasing power to select a model or features that meet your needs for added cargo room, safety or new technology features like hybrid power. Below, we will use an example of a fixed budget of $500 month. I have taken into account the fact that longer term loans tend to have higher interest rates. As you can see; same payment but $7100.00 in additional purchasing power! Wow! Your monthly payment | Your term period | Interest rate2 | The value of the vehicle you can afford | $500 | 5 years | 7.50 | $25,000 | $500 | 7 years | 8.00 | $32,100 |
*Chart is for illustrative purposes only. Example assumes term equals amortization.
As you can see, a seven-year term can help you afford more of the features you want by making your budget go farther. Terms Banks make Available Banks are still risk adverse. As a result, they take into account the age of the vehicle when determine the length of the amortization. With the multitude of extended warranty options available, perhaps the 3 year old car of your dreams, with an extended warranty and a 72 month amortization is exactly what you need! Your amortization period | Loan eligibility based on vehicle age | 60 months | Current year plus seven prior years | 72 months | Current year plus three prior years | 84 months | Current year plus one prior years |
*Chart is for illustrative purposes only | 
