Understanding long and short-term loans | OK Carz

Man and woman looking confused at a piece of paper sitting at a table strewn with papers

How long should you finance your vehicle? 

Financing a vehicle is something that most people have to do. When you finance a vehicle, you essentially break the total cost down into more manageable monthly payments. While the obvious benefit is that you don’t have to pay the full cost of your vehicle outright, you might end up paying more, depending on how long your loan term is. When you apply for financing, you’ll likely want to know how long your vehicle should be financed for.  

Loans generally last for two to seven years and are measured in monthly increments. So, a five-year loan is written as being for 60 months. Generally, the more expensive your vehicle, the longer your loan term. When you have a longer loan term, you’ll be paying less every month, but you’ll be continuously accumulating interest, which drives up the overall cost you’ll be paying for your vehicle.  

[Related: How to make a budget]

Should you finance with a long or short-term loan? 

Loan agreement being stamped while someone hands over a car key

While loans with longer terms are often advised against, for some people, it is the only way they’ll be able to afford a vehicle. While you’ll save money in the long run with a shorter loan term, you’ll end up paying a lot more from month to month. With the shorter-term loan, a reasonably priced vehicle can require what seems like exceedingly high monthly payments, but with a lower interest rate. For drivers who have a strict monthly budget, paying for the lower monthly cost is much more appealing, and sometimes necessary.  

There are a lot of factors that can go into deciding your loan terms, and in many cases, your financial situation plays a role. Drivers who are not able to qualify for traditional bank financing can visit OkCarz to learn more about their financing options. When financing with OkCarz, you can begin to repair and re-establish your credit. Apply for pre-approval and visit one of the five OkCarz locations to find a used vehicle and loan term that works for you.  

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