96-Month Auto Loan: Is It Right For You?

A 96-month auto loan, lasting eight years, allows you to finance a vehicle over a significantly longer period than traditional car loans. The primary appeal is the lower monthly payment. By spreading the loan amount over a longer timeframe, you can afford a more expensive car or manage your budget more comfortably.

However, the lower monthly payment comes at a significant cost: substantially higher total interest paid. The longer the loan term, the more interest accrues. Over eight years, this can add up to thousands of dollars more compared to shorter-term loans (e.g., 36, 48, or 60 months). Before committing, calculate the total cost of the loan, including principal and interest, to fully understand the financial implications.

Depreciation is another major concern. Cars depreciate, meaning their value decreases over time. With a 96-month loan, it's highly likely that you'll be "upside down" on your loan for a significant portion of the term. This means you'll owe more on the car than it's worth. This can be problematic if you need to sell or trade-in the vehicle before the loan is paid off, as you'll need to cover the difference between the loan balance and the car's value.

Increased risk of breakdowns is also something to consider. Over eight years, the likelihood of needing repairs increases. Adding repair costs on top of a long-term car loan can strain your finances. Consider purchasing an extended warranty, but factor that cost into your overall calculation.

Credit score impact is nuanced. While making on-time payments on a 96-month loan can positively impact your credit score, the high interest rates often associated with these loans might indicate that you have a lower credit score to begin with. Furthermore, if you struggle to make payments due to the lengthy term and other financial burdens, your credit score could be negatively affected.

Alternatives to consider before opting for a 96-month loan include saving for a larger down payment to reduce the loan amount, buying a less expensive car, improving your credit score to qualify for a lower interest rate on a shorter-term loan, or exploring leasing options.

In conclusion, a 96-month auto loan can be tempting due to its lower monthly payments. However, the significantly higher total interest paid, depreciation risks, and increased chance of breakdowns make it a potentially risky financial decision. Carefully weigh the pros and cons and explore all available alternatives before committing to such a long-term car loan.