One in Four New-Car Loans Now Runs 7 Years. Here’s What That Really Costs

More than one in four new-car loans written in the third quarter runs seven years or longer. Edmunds puts the share of loans of 84 months or more at a record 25.5%, up from 21.8% a year ago, and the average monthly payment at a record $787.

A longer loan does what it is sold to do: it cuts the payment. What it costs in return is interest and equity, and equity depends on the car as much as the loan. That is why how fast a model loses its value belongs in the same conversation as the loan term.

What Edmunds found

The figures come from Edmunds' third-quarter financing report, published October 1. Each line shows Q3 2026, Q2 2026, and Q3 2025.

• Loans of 84 months or more: 25.5% / 23.9% / 21.8%
• Average monthly payment: $787 / $777 / $756
• Payments of $1,000 or more: 21.2% / 20.3% / 19.1%
• Average amount financed: $44,664 / $44,156 / $42,744
• Average down payment: $5,554 / $5,815 / $6,021
• Average APR: 7.0% in all three quarters
• Average interest over the life of the loan: $9,938 / $9,811 / $9,442

The rate line is the telling one. Borrowing did not get more expensive per dollar. Buyers borrowed more dollars, put less down, and took longer to pay, and Edmunds attributes the record interest bill to exactly that. Among buyers paying $1,000 or more a month, 69% chose terms of 72 months or longer.

Used-car loans averaged $582 a month at 10.6% APR on $30,703 financed.

The same loan at 60, 72, and 84 months

Edmunds reports averages, not what a given term costs. So here is an OctaneDaily calculation. Our assumptions: $44,664 financed (the Edmunds average), a fixed 7.0% APR at every term, no fees, and no early payoff.

• 60 months: $884 a month, $8,400 in interest, $53,064 paid in total
• 72 months: $761 a month, $10,162 in interest, $54,826 in total
• 84 months: $674 a month, $11,960 in interest, $56,624 in total

Going from 60 to 84 months lowers the payment by $210. It adds $3,560 in interest and 24 more payments.

Two cautions. First, the same rate at every term is our assumption; Edmunds does not break out APR by loan length. If the longer loan carries a higher rate, the gap grows: at 8.0%, by our math, the 84-month payment is $696 and the interest is $13,812.

Second, these averages do not describe any one buyer. Put Edmunds' average amount, rate, and 70.5-month term into a loan formula and the payment comes out near $775, not $787, because an average of many payments is not the payment on an average loan.

When does the loan drop below the car's value?

Negative equity means owing more than the car is worth. A longer loan raises that risk because it pays down principal more slowly. On our example loan, the 60-month borrower has repaid $24,911 of principal after three years. The 84-month borrower has repaid $16,513.

The other half is depreciation. Our assumption: the car follows the market average in iSeeCars' latest study, a 41.8% loss over five years, spread evenly. That figure describes past used-car sales against inflation-adjusted sticker prices. It is not a forecast, and the even spread is our simplification.

Scenario 1: the average down payment. Assume the car is worth the amount financed plus the $5,554 down payment, or $50,218, with taxes and fees left out. On that curve, neither loan goes underwater. But after three years the 60-month borrower has about $16,500 in equity and the 84-month borrower about $8,100. After five years, one owns a car worth roughly $29,200 outright. The other still owes $15,056.

The margin differs, too. A first-year loss above 26.5% would put the 60-month loan underwater. For the 84-month loan, the threshold is 21.3%.

Scenario 2: old debt rolled in. In Edmunds' second-quarter negative-equity report, 29.6% of trade-ins toward new vehicles were underwater, by an average of $6,884. Assume the same $44,664 loan includes that $6,884, so the car is worth $37,780. Our estimate of the first month the borrower is back above water:

• Market-average depreciation (41.8%): month 20 on a 60-month loan, month 29 on 72, month 40 on 84
• A model that holds value like the Honda Civic (22.9% in the iSeeCars data): month 15, month 19, month 24
• EV-average depreciation (57.2%): month 29, month 43, month 57

In each case the 84-month borrower waits about twice as long. In the last case, that is nearly five years; Edmunds found the average underwater trade-in in the second quarter was 4.0 years old. The spread between rows is also why resale value is part of our Civic vs. Corolla comparison.

What we don't know

• Who is taking the long loans. The release gives no breakdown by segment, brand, or price band.
• Third-quarter negative equity. The report does not include it. The latest Edmunds figures are for the second quarter; last year's third-quarter numbers came out in mid-October.
• Rates by term. Without them, any 60-versus-84 comparison, including ours, rests on an assumed rate.
• Your car's curve. If a car loses value faster early than late, the break-even months above move later.

Questions to ask before you sign

• What is the total of payments at each term, not only the monthly figure?
• Is the APR the same at 60, 72, and 84 months?
• If you are trading in a car with a loan, how much of the old balance is going into the new one?
• How long do you expect to keep the car, compared with the length of the loan?
• How has this model held its value?

Ivan Drury, Edmunds' director of insights, frames the trade-off this way:

"For some shoppers, a longer loan term may be the only way to get the vehicle they need, but it's important to understand the trade-off. Stretching out a loan shouldn't be a way to talk yourself into a vehicle that doesn't make sense for your budget when you look at the total cost."

Edmunds does not expect quick relief from Washington, either. Commenting on the new federal fuel economy rules, Jessica Caldwell, Edmunds' head of insights, said that "changes to fuel economy requirements don't necessarily translate into lower prices on dealer lots."