Published on 12/27/2025 at 04:54
More and more buyers are choosing long terms to finance new cars. The monthly payments go down,but the total cost of the credit increases. The risk of prolonged debt worries experts and consumers.
Buying a new car has become an increasingly complex financial decision in the United States.
Faced with high prices and interest rates that remain high, many consumers seek to reduce the monthly impact extending the credit period.
This strategy eases the budget, but it can also led to longer and more expensive financial commitments than it initially seems.
7-year car loans Why is it a growing trend?
7-year car loans have become increasingly common among those purchasing new vehicles. According to Edmunds data22% of loans funded during the third quarter of 2025 had terms of 84 months or longer.
Although this figure is slightly lower than the previous quarter,it is still notably higher than in previous years.In the third quarter of 2024,for example,this type of financing represented only 18.5%.
The main reason behind this increase is clear: the average price of a new car is over $42,000 and interest rates are around 7% annually.
For many buyers, extending the term is the only way to make the purchase viable without the monthly payment skyrocketing.
Long-term car financing and the real cost
Long-term auto financing reduces the monthly payment, but significantly increases the total paid for the vehicle. Interest accumulates over a longer period of time, raising the final cost.
Based on the provided text, being “underwater” on a car loan means owing more money on the loan than the car is currently worth.
Here’s a breakdown of what that implies, according to the text:
* Depreciation: New cars lose value quickly.
* Long Loan Terms: With loans stretching to seven years, it’s common to be underwater for a significant portion of the loan.
* Selling/Trading Issues: If you need to sell or trade the car before the loan is paid off, you’ll likely have to pay the difference between the loan balance and the car’s resale value.
* Financial Impact: This situation can limit your financial flexibility and perhaps harm your credit score.