It was once nearly unheard of, but now, the seven-year car loan is pretty much par for the course for one simple reason: it’s the only way most normal folks can afford to own new cars. Average car prices have risen about 28% over the past five years and are sitting right below $50,000. I don’t know about you, but I don’t have 50 large just sitting in my pocket.
Because of that, people are doing everything they can to bring their monthly costs down. Compared with a five-year loan, a seven-year loan can be the difference between $1,000 per month and $780 per month, according to Bloomberg. On the surface, that’s a mighty tempting proposition, and it’s why seven-year loans represented 21.6% of all new-vehicle financing in the second quarter of 2025. Six-year loans, which are now the most common, made up 36.1%. Somewhat worryingly, there’s a growing trend of buyers opting for eight-year loans, but it’s still just a small percentage.
Everybody hurts
Long financing agreements like these hurt both customers and dealers. For customers, it costs them thousands of dollars in the long run. Sure, the monthly payments are cheaper, but they’re paying more overall. The average interest paid on an 84-month loan is $15,460, according to Bloomberg. That’s $4,600 more than the average for a five-year loan, which used to be the standard. It now represents about 19% of new-car financing. Three- and four-year loans only make up about 4% and 6% of all auto loans, respectively.
It’s not like this really works out in the dealer’s favor, either. It means fewer repeat customers as they’re waiting longer and longer between trade-ins. Hell, even when they do finally trade in their car, it’s likely that they’re upside down on the loan — meaning they owe more than the car is worth.
An alternative
