72 Month Car Loans in Ontario: Is 6 Years Too Long For Financing?

When buying a car in Ontario, many people think about how they will pay for it. While some can pay in full, many others need a car loan. One option people often hear about is a 72-month car loan. But what exactly is this, and is it right for you?

 

In simple terms, a 72-month car loan is a loan that lasts for 72 months—meaning six years. This means you agree to pay for your car over the course of six years in monthly installments. It can seem like a long time, but for many Canadians in Ontario, this option can make monthly payments more affordable. Let's take a closer look at the pros and cons of choosing a 72-month car loan from a dealership.

 

The Appeal of a 72-Month Car Loan

One of the biggest reasons why people consider a 72-month car loan is because it lowers the monthly payment. For example, if you buy a car that costs $30,000, spreading the payments over six years makes the monthly cost smaller than a shorter loan, like a 48-month or 60-month loan. This can be helpful for people who want to manage their budget and not feel stressed by high car payments.

 

Another benefit is that a 72-month car loan allows you to buy a more expensive car. With lower monthly payments, you may be able to afford a nicer car with more features. However, it’s important to remember that just because the monthly payment is lower, it doesn’t mean the overall cost of the car is less.

 

The Drawbacks of a 72-Month Car Loan

While a 72-month car loan can make the monthly payments lower, there are some downsides to consider. One major drawback is that you end up paying more in interest over time.

 

Car loans come with interest, which is the cost of borrowing money. The longer your loan, the more interest you pay. So, while your monthly payments are lower, the total amount you pay for the car will be higher compared to shorter loans.

 

For example, if you choose a 72-month car loan with a 5% interest rate, you will end up paying more in interest compared to a 48-month loan with the same interest rate.

 

This is something to keep in mind when thinking about how much the car will really cost you.

 

Negative Equity Risk

Another concern with a 72-month car loan is the risk of negative equity. Negative equity happens when the value of your car drops faster than the amount you owe on your loan. Cars usually lose value (depreciate) quickly, especially in the first few years.

 

If you have a long loan term, you might owe more on the car than it’s worth. This can be a problem if you decide to sell or trade in the car before the loan is paid off.

 

Being in negative equity can limit your options if you want to switch cars, or if your car is damaged or written off in an accident. It's important to think about how long you plan to keep the car before deciding on a 72-month car loan.

 

Is a 72-Month Car Loan Right for You?

Deciding whether a 72-month car loan is right for you depends on your personal situation. If you prefer lower monthly payments and don’t mind paying more in interest over time, this option could work for you. However, if you want to pay less overall for your car and avoid the risk of negative equity, a shorter loan might be a better choice.

 

It’s also important to compare interest rates from different lenders. Dealerships in Ontario often work with various lenders, so shopping around can help you find the best deal. Just remember to factor in the total cost of the loan, not just the monthly payments.

 

Final Thoughts on 72-Month Car Loans

A 72-month car loan can make it easier to afford the car you want with manageable monthly payments, but it’s important to be aware of the higher interest costs and the potential for negative equity.

 

Always consider your long-term financial goals when choosing a loan, and talk to your dealership in Ontario about your options. By understanding the pros and cons, you can make a decision that works best for your budget and lifestyle.