Should You Get a 96 Month Car Loan For Your Next Vehicle?

If you're thinking about buying a car in Ontario, you might have come across the option of a 96-month car loan. But what does this mean, and is it the right choice for you?

 

Let's break down everything you need to know about 96-month car loans in simple terms so you can make an informed decision.

 

 

What Is a 96-Month Car Loan?

A 96-month car loan is a financing option where you repay the amount you borrow for a car over 96 months, which is equivalent to 8 years. This is one of the longest loan terms available for car buyers.

 

With this type of loan, your monthly payments are lower because you’re spreading the cost over a longer period. However, there are some important things to consider before choosing a 96-month car loan.

 

Why Choose a 96-Month Car Loan?

There are a few reasons why you might be interested in a 96-month car loan:

 

• Lower Monthly Payments: One of the biggest benefits of a 96-month car loan is that it offers lower monthly payments. Because the loan is stretched over 8 years, your payments will be smaller than with a shorter-term loan.

 

• Afford a More Expensive Car: If you have your eye on a car that's a bit out of your price range, a 96-month car loan can make it more affordable by lowering the monthly payments.

 

• Flexibility with Your Budget: Since the payments are lower, a 96-month car loan can free up extra cash each month for other expenses, making it easier to manage your overall budget.

 

The Drawbacks of a 96-Month Car Loan

While a 96-month car loan might sound like a good idea, it’s important to understand the downsides:

 

• Paying More Interest: The longer the loan term, the more interest you’ll pay over time. Even though your monthly payments are lower, you’ll end up paying more in total with a 96-month car loan than you would with a shorter-term loan.

 

• Negative Equity: When you take out a 96-month car loan, there's a higher chance of owing more on the car than it's worth, especially in the first few years. This situation is known as "negative equity." Cars lose value over time, and with such a long loan, you might still owe a lot of money even when your car has depreciated in value.

 

• Longer Commitment: Committing to a 96-month car loan means you’re locked into payments for 8 years. If your financial situation changes or you want to trade in your car, it could be more difficult to do so.

 

Is a 96-Month Car Loan Right for You?

A 96-month car loan might be a good option if:

 

• You have a tight budget and need the lowest possible monthly payments.
• You're set on buying a more expensive car that you couldn't afford with a shorter-term loan.
• You plan to keep the car for a long time and don't mind the extended commitment.

 

However, it's important to remember that a 96-month car loan means you'll pay more in interest overall, and you could end up with negative equity. If possible, consider a shorter-term loan to save money in the long run.

 

Alternatives to 96-Month Car Loans

If you're not sure about committing to a 96-month car loan, here are some alternatives:

 

• Shorter Loan Terms: Opting for a 60-month or 72-month car loan means higher monthly payments, but you’ll pay off the loan faster and pay less interest overall.

 

• Save Up a Larger Down Payment: By putting more money down upfront, you can reduce the amount you need to borrow and shorten your loan term.

 

• Consider a Used Car: Used cars are often more affordable, meaning you might not need such a long loan term to make monthly payments manageable.

 

Choosing a 96-month car loan can be tempting because of the lower monthly payments, but it's essential to understand the full picture. While this option makes it easier to fit a car into your budget, it also means paying more interest over time and being in debt for a longer period.