Things To Consider Before Signing an 84 Month (7-Year) Car Loan


Long Term Car Financing: Good or Bad?

Getting an 84-month car loan term means lower monthly payments and 7 years to make payments towards your vehicle. It’s also the most common term length amongst Canadian’s who choose car financing. While it works for a lot of Canadian’s, there are certainly some drawbacks to a loan term that long. In this article, we’ll talk about the pros and cons of an 84-month car loan and give you some tips on how to manage a 7-year loan. 

What’s Bad About an 84 Month Car Loan?

Typically, the longer the car loan term, the more you pay in interest. So while you may have lower monthly payments, you could actually be spending more overall on the car over the 7 year period. 

The second concern with opting for a long loan term is that you could end up in what’s known as an “upside-down” car loan. An upside-down loan means that you owe more on the car loan than the car is worth. An example of this would be if you sold the car and the money you got for it still wasn’t enough to pay off the remainder of the loan. Initially, most people will be in an upside-down loan after financing a car unless they put a down payment because they’ve just started paying off what they owe and vehicle depreciation is so significant in the first year of new car ownership. While this happens with most car loan terms, an 84-month term means being in negative equity for longer. 

family in car at a dealership

The last thing to be concerned about when it comes to a 7-year car loan is the expired warranty. If you’re being stretched thin by your monthly payments alone and then you have need vehicle repairs, will you be able to afford it not having a warranty? This is why many people opt for 5-year car loan terms so that their extended warranty is still active while they’re financing. 

What’s Great About an 84 Month Car Loan?

One of the biggest reasons 84-month car loans are so popular amongst Canadians is because it makes expensive cars more attainable. Adding a year or two to the loan term can be the difference between getting the vehicle you really want or settling for less. 

Another great reason to get an 84-month car loan is that it frees up space for other monthly expenses. Maybe you’re also managing a mortgage and need that extra bit of financial breathing room and the long-term car loan allows that. The lowered monthly payments also mean that if unexpected expenses come up, you should be able to manage them easier.

The last advantage of a longer-term car loan is that it gives you more of an opportunity to build your credit. As we’ve discussed in other articles, getting a car loan is one of the best ways to improve your credit score. Because the loan term is longer, you’re able to show lenders that you were able to responsibly manage a car loan for seven years!

pros and cons of a 7 year car loan term chart

Tips If You Want a Long Term Car Loan

1. Used Car’s Depreciate Less. New cars can depreciate by up to 25% in their first year on the road! Because of this, there’s a good chance that you’ll end up in an upside-down car loan. This is why it’s smart to finance a used car because it’s already gone through its most significant period of depreciation. For cars that are only 2-3 years old, 84-month length terms are still possible.

2. Try and Make a Down Payment. Making a down payment is a great way to ensure you don’t put yourself in an upside-down car loan. It will also lower your monthly payments, allowing even more breathing room for the coming years of financing. While it’s not required in order to get financing, if you can manage it, you should put some money down.

3. Get an Extended Warranty. Getting an extended warranty that covers you for the duration of your loan term is a great way to keep yourself protected. This way, if anything were to happen to your vehicle that required repairs, you wouldn’t need to cover the cost of both the mechanic bill and the monthly payment.

Ready to Buy a Car?

If you’re ready to buy a car, check out our rates page to see the current rates of lenders across the country. Once you’ve seen our rates page, check out our car loan calculator to see a rough estimate of what your monthly payments will be!

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