The 7-year car loan is here. Do you really want to be paying off your car in 2032?

Core Insights - The trend of new-car shoppers opting for seven-year loans is increasing, reflecting the rising costs of vehicle financing [1][2][10] - The average new-car loan amount has reached $42,647 with an interest rate of 7%, leading to monthly payments averaging $754 [1][6] - A significant portion of new-car buyers, nearly 20%, are now paying monthly payments of at least $1,000 [1] Financing Trends - Auto loans with terms of seven years or longer accounted for 22% of all new vehicle financing in Q3 2025, nearing an all-time high [1][5] - The average cost of a new car hit a record high of $50,080 in September 2025, contributing to the trend of longer loan terms [6] - Historically, shorter loan terms were more common, with only 10% of new car buyers now choosing loans of four years or less [5] Interest Rates and Payments - The average interest rate on a five-year new-car loan increased from 5% in August 2020 to 7.6% in August 2025 [6] - Longer loan terms result in lower monthly payments, which can lead buyers to prioritize monthly affordability over total loan costs [7][8] - For example, a $40,000 loan at 7% interest results in significantly higher total interest payments as the loan term increases [9][10] Underwater Loans - The risk of being "underwater" on loans is rising, with one-quarter of customers trading in used vehicles owing more than their trade-in value [11] - The depreciation of vehicles, especially older models, exacerbates the issue of negative equity for buyers financing over longer terms [12] - Experts suggest considering larger down payments and the long-term ownership of the vehicle to mitigate risks associated with seven-year loans [12][15]