Risks Associated With A Long Term Car Loan | Toronto Car Loans, Ontario
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Risks Associated With A Long Term Car Loan

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Pros and cons of a longer-term car loan


– Decreased consistent car payments may be beneficial in the short term by assisting you to control the cost of a new car in a simple way. 


  • may force you to buy “more car” than you can actually sustain
  • could mean paying extra interest over the schedule of the loan
  • could mean more “negative equity” risk — if the value of your car is more than the total you owe on your loan.
Paying extra for the same car
The overall cost of the car is increased when you opt for a longer-term car loan since the interest you will pay over the loan’s term. In the example below, you would pay more than double as much in interest, increasing Car B’s overall cost by an increased amount of  $2,700.
 Price of
the car
Interest rate
on the loan
Term of the
loan (months)
Cost of the car
with interest
Car A$25,0005.00%36$26,973.81$1,973.81
Car B$25,0005.00%84$29,681.21$4,681.21
Buying “too much” car
In the example below, the regular payments are identical even though Car A is nearly twice as expensive as Car B. In the case of Car A, you would need to ensure that you could afford the regular payments and all the other carrying costs for twice as long and be comfortable paying close to $3,500 more in interest.
 Price of
the car
Interest rate
on loan
Term of the
loan (months)
Car A$29,7755.00%72$479.50$4,750.75
Car B$16,0005.00%36$479.50$1,263.24

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