Why 96-Month Car Loans Are a Growing Trend

If you’ve shopped for a car lately, you might have noticed something unusual: loan terms stretching out as long as eight years. That’s right—96-month auto loans, once a rarity, are becoming a mainstream offering at dealerships and lenders across the country. On the surface, it seems like a win for consumers: lower monthly payments, access to better vehicles, and a chance to drive that dream car without breaking the bank. But dig a little deeper, and you’ll find a trend fueled by economic pressure, shifting consumer behavior, and systemic risks that could have long-term consequences for millions of Americans.

The Driving Forces Behind the 8-Year Loan

So why are 96-month loans gaining traction? It isn’t because people suddenly decided they love debt. Instead, it’s a symptom of larger economic realities.

Soaring Vehicle Prices

The average price of a new car in the U.S. has skyrocketed, now hovering around $48,000. Electric vehicles (EVs), which are becoming increasingly popular, often start at $60,000 and can easily exceed $100,000. With wages not keeping pace, consumers are turning to longer loan terms to make monthly payments manageable. A 96-month loan can reduce a monthly payment by hundreds of dollars compared to a traditional 60-month loan, making that SUV or electric sedan seem within reach.

Inflation and Economic Uncertainty

Inflation has hit everything from groceries to gas, squeezing household budgets. Many families are prioritizing cash flow over long-term cost. A longer loan term acts as a temporary relief valve, freeing up money for other essentials—or at least creating the illusion of breathing room. In an era of economic volatility, the allure of lower monthly payments is hard to resist.

The Role of Interest Rates

The Federal Reserve’s rate hikes have made borrowing more expensive. While longer loans often come with higher interest rates, the extended term still results in a lower monthly payment. For buyers focused on the short term, that’s a trade-off they’re willing to make. Lenders, eager to keep volume high, are happy to accommodate.

Who’s Taking Out These Loans?

Not everyone is signing on the dotted line for a 96-month loan. The trend is particularly pronounced among certain demographics.

First-Time Buyers and Young Adults

For younger buyers entering the market, affordability is a major hurdle. With student loan debt and rising rent costs, a 96-month loan can be the only way to finance a reliable vehicle. Many are opting for longer terms to avoid buying used cars, which have also seen significant price increases.

The Middle-Class Squeeze

Middle-income families, once able to pay off a car in five years, are now stretching loans to keep up with lifestyle expectations or simply to accommodate higher-priced models with advanced safety and technology features. For some, it’s less about luxury and more about necessity—modern cars offer connectivity and safety systems that older models lack.

The Electric Vehicle Factor

EV adoption is accelerating, but these cars come with premium price tags. Buyers interested in sustainability or looking to save on gas are using extended loans to justify the upfront cost. Government incentives and lower operating costs help, but the initial investment remains high.

The Hidden Risks of Long-Term Auto Debt

While 96-month loans might seem like a smart hack, they come with significant downsides that borrowers often overlook.

Negative Equity: The “Upside-Down” Trap

Cars depreciate rapidly, typically losing 20-30% of their value in the first year. With a 96-month loan, you’re paying off the vehicle at a slower rate than it’s depreciating. This creates a high risk of being “upside-down”—owing more on the loan than the car is worth. If you need to sell or trade in the vehicle early, you could be stuck covering the difference out of pocket.

Higher Interest Costs

Longer loans mean more interest payments over time. A $40,000 loan at 5% APR for 60 months would cost about $5,300 in interest. Stretch that to 96 months, and the interest jumps to $8,500—even if the interest rate stays the same. In reality, lenders often charge higher rates for longer terms, making the total cost even steeper.

Maintenance and Reliability Concerns

Most cars aren’t designed to be financed for eight years. As the vehicle ages, maintenance costs rise. Warranty coverage typically expires long before the loan is paid off, leaving owners with repair bills while they’re still making payments. This financial double-whammy can strain budgets and lead to difficult choices.

Reduced Financial Flexibility

Committing to a long-term loan limits your ability to adapt to life changes—job loss, medical expenses, or other emergencies. It also delays your next car purchase, effectively keeping you in a cycle of debt.

Why Lenders Are Pushing 96-Month Loans

It’s not just consumers driving this trend. Lenders and dealerships have incentives to promote longer loans.

Profit Motive

Banks and credit unions earn more interest over the life of a longer loan. Dealers often receive incentives from lenders for originating these contracts. For them, it’s a win-win: they move inventory and maximize profit per sale.

Keeping Payments “Affordable”

As car prices climb, lenders face a dilemma: how to keep loans accessible without raising monthly payments to unsustainable levels. Extending the loan term is an easy fix, even if it kicks the can down the road.

Competitive Pressure

Once one lender offers 96-month terms, others follow to avoid losing customers. It’s a race to the bottom that prioritizes short-term gains over long-term stability.

The Broader Economic Implications

The rise of 96-month loans isn’t just a personal finance issue—it’s a macroeconomic concern.

Consumer Debt Bubble

Auto loan debt in the U.S. has reached record levels, exceeding $1.5 trillion. Longer loan terms contribute to this growing bubble. If economic conditions worsen—say, a recession or spike in unemployment—defaults could surge, impacting lenders and the broader economy.

Impact on the Auto Industry

Automakers have become reliant on long loans to keep sales high. If consumers become overextended, demand could collapse, leading to production cuts and job losses. It’s a cycle that mirrors the housing crisis in some ways, though on a smaller scale.

Social Inequality

Long-term loans often target vulnerable populations—those with lower credit scores or limited income. They end up paying more for their vehicles and face higher financial risk, exacerbating wealth inequality.

Alternatives to 96-Month Loans

If you’re considering a 96-month loan, it’s worth exploring other options.

Buying Used

Certified pre-owned vehicles offer reliability at a lower cost. With shorter loan terms, you can avoid negative equity and save on interest.

Leasing

For those who want a new car every few years, leasing can be a better fit. It avoids long-term commitment and maintenance worries, though it comes with mileage limits and no ownership equity.

Saving for a Larger Down Payment

Putting more money down reduces the loan amount and monthly payment, making shorter terms feasible. It requires discipline but pays off in the long run.

Prioritizing Affordability

Choose a less expensive model or trim level. Sometimes, the dream car isn’t worth the financial stress.

The Future of Car Loans

As vehicle prices continue to rise and technology evolves, the auto loan landscape will keep changing. Subscription models, flexible ownership, and even pay-per-mile financing might become more common. But for now, 96-month loans are a Band-Aid on a deeper problem: the growing gap between car prices and what people can afford.

Whether this trend is here to stay or a precursor to a larger crisis remains to be seen. What’s clear is that for many, the eight-year loan is less a choice and more a reflection of economic reality. And that’s a trend worth watching—and worrying about.