Monthly payment vs total cost
When people borrow for a car, a home or anything large, the question is usually "can I afford the monthly payment?". The better question is "what will this cost in total?"
How term changes total cost
A $20,000 car loan at 7% APR:
| Term | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 36 months | $617.54 | $2,232 | $22,232 |
| 48 months | $478.92 | $2,988 | $22,988 |
| 60 months | $396.02 | $3,761 | $23,761 |
| 72 months | $340.98 | $4,551 | $24,551 |
Stretching from 48 to 72 months lowers the payment by about $138, and adds about $1,560 in interest. A longer term also means owing money for longer than many people keep a car.