We’ve covered seven-year car loans before, which are growing in popularity. The average length of car ownership in Australia is 10.1 years, according to the Australian Bureau of Statistics (ABS), and there are options out there for someone who wants to extend their car loan for as long as they own their vehicle.

The main benefit of a longer loan term is that your monthly payment is lower than if you selected a shorter term. But at what cost? Compare some of the longest-term car loans available in the table below, and find out whether they’re worth it.

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LenderCar LoanInterest Rate Comparison Rate* Monthly Repayment Interest Type Vehicle Type Maximum Vehicle Age Ongoing Fee Upfront Fee Total Repayment Early Repayment Instant Approval Online Application TagsFeaturesLinkCompare
6.57% p.a.
7.19% p.a.
$588
Fixed
New
No Max
$0
$250
$35,278
Loan amounts from $2k to $75k
  • Available for any new motorised vehicle
  • No ongoing or early exit fees
  • 1-7 years loan terms. Pay monthly, fortnightly, or weekly
  • Get quick decision. Funds in 24 hrs if approved
6.49% p.a.
6.84% p.a.
$587
Fixed
New, Used
7 years
$0
$250
$35,211
6.29% p.a.
7.62% p.a.
$584
Variable
New
No Max
$0
$195
$35,042
6.99% p.a.
7.27% p.a.
$594
Variable
New
2 years
$0
$200
$35,634
Important Information and Comparison Rate Warning

All products with a link to a product provider’s website have a commercial marketing relationship between us and these providers. These products may appear prominently and first within the search tables regardless of their attributes and may include products marked as promoted, featured or sponsored. The link to a product provider’s website will allow you to get more information or apply for the product. By de-selecting “Show online partners only” additional non-commercialised products may be displayed and re-sorted at the top of the table. For more information on how we’ve selected these “Sponsored”, “Featured” and “Promoted” products, the products we compare, how we make money, and other important information about our service, please click here.

The comparison rates in this table are based on a loan of $30,000 and a term of 5 years unless indicated otherwise. The comparison rates for car loans and secured personal loans for the relevant amounts and terms are for secured loans unless indicated otherwise. The comparison rates for unsecured personal loans are applicable for unsecured loans only. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. Comparison rates are not calculated for revolving credit products.

Monthly repayment figures are estimates only, exclude fees and are based on the advertised rate for the term and for the loan amount entered. Actual repayments will depend on your individual circumstances and interest rate changes. Rates correct as of . View disclaimer.

Important Information and Comparison Rate Warning

Pros and cons of long-term car loans

There are a few things you’ll need to weigh up with a longer car loan term. Mostly it comes down to striking a balance of a repayment that works with your budget and the total interest paid overall. Some considerations are below.

Pros of long-term car loans

  • Lower monthly payments: The monthly payment on a 5% p.a. interest rate over five years for a $30,000 loan is $566, as opposed to a seven-year term’s monthly repayments of $424, assuming there are no additional fees. This can make them more affordable in the short-term.

  • Terms as long as 12 years: If you’re determined to keep your car as long as possible, you could stretch your loan out for the length of ownership.

Compare low-rate car loans

Cons of long-term car loans

  • More interest and costs accrued overall: Using the 5% example above, a five-year term means you’d accrue $3,960 in total interest costs, compared to $5,616 over seven-years. Of course, this isn’t accounting for any extra fees, which there could be more of should you extend your car loan past seven years.

  • Higher risk of negative equity: Negative equity is owing more on the car than what it's worth at market value. If you write-off your car, then that could be a significant gap out of your own pocket that your insurer doesn’t pay to your lender. Of course, this is true for any loan term, but cars generally dwindle in value past the seven-year mark.

A 2018 report by the Financial Times said “Lenders in America’s $1.2tn car-loan market are extending terms for as long as eight years, meaning they face a greater risk of defaults and meagre recovery values”. This suggests that longer-term car loans are riskier for both lender and borrower, which is probably why there aren’t as many of them.

So it’s important if you’re thinking of opting for a longer car loan to consider whether you have the capacity to stay on top of or even get ahead on your repayments.

Savings.com.au’s two cents

If you’re thinking of a car loan, you’ll probably need to work out how that monthly repayment works into your budget and go from there. Short-term car loans can be good because of the smaller interest costs overall, but you might not have the stomach to pay extra every month.

It might be worth paying a little extra in interest to make sure you’re not going to default on the car loan. With groceries, bills, and life seemingly only getting more expensive, you don’t want to risk having your car repossessed as well.

Longer-term car loans aren’t inherently a bad thing, but consider your motivations with opting for one in the first place. The more interest paid over the life of the loan could ultimately go to a rainy-day fund, a holiday, or towards paying off other bills.

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