What is the Average Car Loan Length in Canada? Find Your Answer
The average car loan length can vary from 72 months or 6 years. It primarily varies from as short as 12 months to as long as 96 months. Many lenders offer car loan tenure in 12-month increments. The shorter the term loan, the higher the monthly payments it has. Longer-term loans have lower monthly payments and increased interest rates. This totally depends on the financial condition of the borrower and the lender’s criteria.
Advantages of Longer-Term Car Loans
- It has lower monthly payments and this makes it easily affordable.
- Regular payments can help the borrower improve their credit score.
- With lower monthly payments, the borrower can afford expensive cars.
Disadvantages of Longer-Term Car Loans
- Longer-term car loans are expensive as they have high rates of interest.
- Since vehicles depreciate over time, borrowers are required to pay more than the worth of the car.
Advantages of Shorter-Term Car Loans
- Shorter-term car loans can allow borrowers to make easy monthly payments with low interest rates.
- The vehicle tends to have less time to depreciate during the loan period and it results in fewer extra payments.
- Borrowers tend to get out of debt faster and more easily.
How to Minimize the Length of a Car Loan?
There are simple things that you need to follow to minimize the length of an auto loan. You must follow these things:
- If you afford to put down larger down payments, you tend to get lower potential interest rates, and this results in savings. Larger down payments result in less borrowing which can mean a shorter auto loan.
- Boost and improve your credit score in advance to get low interest car loan. Paying less interest every month impacts the ability to pay more principal amount.
- Auto loans for used cars are shorter than for new cars. Buying nearly new cars is cheaper and can give you an opportunity to avail new deals.
- Auto loans are more expensive than leases because you are not paying for the asset.
Average Used Car Loan Length – 36 to 72 months
Average New Car Loan Length – 36 to 72 months and can exceed up to 84 months
How to Save Money from Paying Extra on Car Loans?
- Opt for refinancing because you can get a better interest rate and shorten your term to clear out the car loan quickly.
- Performing regular car maintenance can relieve you from paying extra. Be consistent in checking the battery of the car, tire care, and other things to avoid extra payments. Equip your vehicle with extra safety features.
- Save money on insurance by cracking the best rates from several dealerships. Comparing the coverage and discounts available to keep that extra money for something else.
Car loans come in different types and forms and it can differ the average car loan length. You can choose freely the amount, length, and type of loan you want to opt for. It is necessary to consider a few factors and then make an informed decision.
Jack FortinAuto Finance Expert
Jack Fortin is one the leading car loan and auto finance experts in British Columbia, Canada. He loves to write and share car loan news and updates.