Why 84-Month Auto Loans Are Insanity

We have normalized the 72 and 84-month car loan. Why? Because truck prices have hit $80,000 and wages haven't kept up. Dealers ask 'What payment do you want?' and then stretch the term until the math 'works'. But here is the truth: A car is a depreciating asset. It loses value like a rock falling off a cliff. If you finance it for 7 years, you will be 'underwater' (owing more than it's worth) for about 6 of those years. If you wreck it, you're broke. If you want to trade it in, you have to roll negative equity into the next loan. Stop. Buy a beater. Pay cash.

1. How Car Depreciation Works

A new car loses about 20% of its value in the first year. By year 3, it's worth about 50% of what you paid. By year 7, it's worth about 30% of what you paid. But if you financed it for 7 years, you're still paying for 100% of the original price, plus interest. You're paying $50,000 for a car that's worth $15,000. That's called being underwater, and it's the norm for 84-month loans. The bank doesn't care. They got their money. You're the one stuck paying for a car that's worth a fraction of what you owe. Depreciation is guaranteed. Your car will lose value. Your loan balance won't. That's the math that kills you.

2. The Payment Shopping Scam

Dealers have perfected the art of "payment shopping." They ask you what payment you want, then stretch the term until they hit that number. Want a $400 payment? They'll give you an 84-month loan. Want a $300 payment? They'll stretch it even further or find a way to make it work. But here's what they don't tell you: A longer term means more interest. A $40,000 car at 7% for 60 months costs $8,000 in interest. The same car for 84 months costs $12,000 in interest. You're paying $4,000 more just to have a lower payment. The dealer doesn't care. They get their commission either way. The bank doesn't care. They get more interest. You're the one paying $4,000 extra. Don't shop by payment. Shop by total cost. The payment is irrelevant if you're paying thousands more in interest.

3. The Underwater Problem

If you finance a car for 84 months, you'll be underwater for about 6 of those years. That means you owe more than the car is worth. If you wreck it, insurance pays the value, not the loan balance. You're on the hook for the difference. If you want to trade it in, you have to roll the negative equity into the next loan. Now you're financing a $30,000 car with $10,000 of old debt rolled in. You're paying $40,000 for a $30,000 car. And the cycle continues. You're trapped. You can't sell the car because you owe more than it's worth. You can't trade it in without rolling debt. You're stuck making payments on a depreciating asset that's worth less than you owe. The bank loves this. You're trapped. They're making money. Don't get trapped.

4. Why Banks Love Long-Term Auto Loans

Banks love 84-month auto loans for the same reason they love credit card minimum payments: They make more money. A 60-month loan at 7% on a $40,000 car generates $8,000 in interest. An 84-month loan at the same rate generates $12,000 in interest. That's $4,000 more profit for the bank. Plus, longer terms mean you're more likely to be underwater, which means you're more likely to need gap insurance (which they sell), more likely to roll negative equity into a new loan (more interest), and more likely to default (they get the car and you still owe). The bank wins every way. You lose every way. The bank isn't offering 84-month loans to help you; they're offering them to help themselves. Don't take the bait.

5. The True Cost of an 84-Month Loan

Let's do the real math. You buy a $50,000 truck with an 84-month loan at 8% interest. Your payment is $750 a month. Over 7 years, you pay $63,000 total. But here's what happens: Year 1, the truck is worth $40,000 but you owe $46,000. Underwater. Year 3, the truck is worth $25,000 but you owe $38,000. Still underwater. Year 5, the truck is worth $18,000 but you owe $28,000. Still underwater. Year 7, you finally own it, but it's worth $12,000 and you paid $63,000 for it. You lost $51,000 in depreciation and interest. If you had bought a $15,000 used truck with cash, you'd have saved $48,000. The 84-month loan cost you $48,000. That's the true cost. It's not just the interest; it's the depreciation plus interest. You're paying for a car that's losing value faster than you're paying it off.

6. The Alternative: Buy Used and Pay Cash

The alternative to an 84-month loan is simple: Buy a used car and pay cash. A 3-year-old car has already taken the biggest depreciation hit. It's lost 50% of its value, but it still has 10+ years of life left. You can buy a $50,000 truck that's 3 years old for $25,000. Pay cash. No loan. No interest. No underwater problem. If you wreck it, you're not stuck with a loan on a totaled car. If you want to sell it, you can. You're free. The bank hates this because they don't make money. But you love it because you save money. A $25,000 used car that you own is better than a $50,000 new car that you're paying $63,000 for over 7 years. The math is simple. The choice is yours.

7. How to Afford a Car Without an 84-Month Loan

If you can't afford the payment on a 60-month loan, you can't afford the car. It's that simple. The solution isn't to stretch the term; it's to buy a cheaper car. If you can afford $400 a month, that's $24,000 over 60 months. Buy a $20,000 car (or less) and finance it for 60 months. Or better yet, save up and pay cash. If you can afford $400 a month in payments, you can save $400 a month. In 3 years, you'll have $14,400. Buy a $12,000 car with cash. No loan. No interest. No underwater problem. The bank will tell you that you "need" a car now and can't wait. But you don't need a new car; you need transportation. A $5,000 beater will get you to work just as well as a $50,000 truck. The difference is $45,000 in your pocket instead of the bank's.

8. The Bottom Line

84-month auto loans are insanity. They keep you underwater for years, cost thousands more in interest, and trap you in a cycle of debt. If you need 7 years to afford the payment, you cannot afford the car. Buy a cheaper car. Buy a used car. Pay cash if you can. But don't take an 84-month loan. The bank is the only one who wins. You lose. Every time. The dealer will tell you it's "affordable." The bank will tell you it's "flexible." They're lying. It's expensive and it's a trap. Don't fall for it. Buy what you can afford. Pay cash if possible. Stay out of debt. The bank hates this advice because it means less profit for them. But you'll love it because it means more money for you.