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Car loans are a great way for buyers to spread their payments out over an extended period to ensure they’re comfortable with managing the debt. Because of this, you might be looking for the maximum available car loan term to help you do just that, which you can find out more about right here with Savvy.
Learn all about long-term car loans, how they work and what the longest car loan you’ll be able to take out for your situation will be. Read more with us today before you start the car loan application process.
What is the maximum car loan term available?
In almost all cases, the maximum term available for a car loan is seven years (or 84 months). Most lenders will enable customers to space out their repayments over this timeframe, which can benefit borrowers by reducing the value of their ongoing instalments.
For example, while a $30,000 car loan at 7.50% p.a. would cost $601 per month over a five-year term, repayments would only set you back $$460 if you extended it to the maximum seven-year term.
It's important to note, however, that the longer your loan term, the more you’ll pay overall. You’d save more than $2,500 overall on that five-year term compared to seven, for instance. The following table demonstrates this in more detail:
| Loan term | Monthly repayments | Total interest paid |
|---|---|---|
|
One year |
$2,603 |
$1,233 |
|
Two years |
$1,350 |
$2,400 |
|
Three years |
$933 |
$3,595 |
|
Four years |
$725 |
$4,818 |
|
Five years |
$601 |
$6,068 |
|
Six years |
$519 |
$7,347 |
|
Seven years |
$460 |
$8,652 |
Repayments are based on a $30,000 car loan with a 7.50% p.a. interest rate.
Can I be approved for the maximum available car loan term?
The maximum term available to one person may be completely different to that of another. There are many factors which shape your approval chances when applying for a loan, with some of these variables including:
- Your credit score: the better your credit record, the more likely a lender will be to approve a larger, longer-term loan application. Individuals who’ve struggled more with credit in the past will be far less likely to be approved for a loan with a longer term.
- Your income and employment stability: the more you earn and the more stable your employment and income, the more willing a lender will be to entrust you with a loan at the maximum term. For example, a car loan for a student working casually is likely to be smaller and shorter than one approved for a teacher with ten years in the same job.
- The size of your loan: lenders won’t allow small car loans to be stretched out over the maximum term. For instance, a $10,000 loan is highly unlikely to be able to be spread out over seven years. A $70,000 loan would be a better candidate for the maximum term.
- The age of your vehicle: the maximum term length of used car loans can also vary. If your lender is only willing to finance vehicles up to ten years old and your ideal car is seven years of age at the point of sale, you may find you’re limited to a three-year loan term in this case.
Additionally, according to Bill Tsouvalas, Managing Director of Savvy, something as simple as comparing your lender options can help you maximise your available loan term.
“Not all lenders offer the same loan terms, with some capping them at five, rather than seven”, he said.
“Because of this, if you’re looking for a seven-year loan, it’s important to consider your lending options and apply with one that offers this term.”
Can I take out a ten-year car loan?
There are select lenders in the market in Australia who may be able to offer ten-year car loans. However, your options for this product are extremely limited in Australia; as of March 2024, only People’s Choice Credit Union offers a loan term of up to ten years with its Discounted Personal Loan (Car Loan) and Green Car Loan products.
It's worth noting also that a ten-year loan will cost you a fair amount more than a seven-year term. Using the same example mentioned earlier, a $50,000, seven-year loan repaid monthly at 7.50% p.a. would cost $766.91 each month and $64,420.76 overall. In contrast, extending the term to ten years reduces the repayment to $593.51, but increases the overall cost to $71,221.06.
Is there any way to extend my car loan beyond the maximum term?
Yes – you can extend the term of your agreement by refinancing your car loan. This involves taking out a new loan to pay off the remainder of your current loan, therefore replacing your monthly repayments with those of a different deal.
Many car buyers use the refinancing process to extend their loan terms. This can be to reduce their ongoing repayments, thus making them easier to manage month to month. If you’re five years into your seven-year car loan and decide to refinance, you may find a lender willing to spread your remaining debt over five years, rather than two. In this situation, you would’ve extended your loan beyond its original maximum term.
However, as mentioned above, doing so will cost you more over the life of your loan. If you have the capacity to repay your loan over a shorter term without stretching your budget, you may decide it’s better for your hip pocket in the long run to opt against the maximum term and save on interest.
Common queries about long-term car loans
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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.
The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.
Approval for car loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.
The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.
