1 in 3 New Car Loans Now Last Longer Than 6 Years. Here’s the Trap Hiding Inside That Low Monthly Payment.

Car loans are getting longer, and not by a little. A record 31.1% of new auto loans now stretch past 72 months (six years), according to Cox Automotive data through June. That’s the highest share ever recorded, and it’s climbing at the same time car prices and interest rates are both elevated, which isn’t a coincidence.

Stretching a loan out is an easy way to make a monthly payment look manageable. The problem is what it does to the other side of the ledger: how fast you actually build equity in the car versus how fast the car loses value.

The math that makes long loans dangerous

A car starts losing value the moment it’s driven off the lot, and it depreciates fastest in the first few years. A 72- or 84-month loan pays down the balance slowly by design, since stretching payments over more months means less principal gets knocked out early on. Put those two curves next to each other, fast depreciation and slow payoff, and there’s a real stretch of time where you owe more than the car is worth. That’s called negative equity, or being underwater.

This isn’t a rare edge case anymore. Edmunds data shows 30.9% of trade-ins toward new vehicle purchases carried negative equity in the first quarter of 2026, just short of the all-time record set in early 2021. The average amount owed on those underwater trade-ins hit $7,183 in Q1, the highest ever recorded for a first quarter, and it settled at $6,884 in the second quarter, still historically elevated. That’s up 42% from the same point five years ago.

The connection to loan length isn’t subtle either. Among new vehicle loans with trade-ins carrying negative equity, 90.2% had terms of at least 72 months, and 43% went all the way to 84 months.

Why this is getting worse, not better

Part of this is a hangover from the pandemic used-car market. Vehicle values spiked when supply was tight, which meant a lot of buyers who financed at those inflated prices are only now coming back to trade in, right as used vehicle values have normalized down to more typical levels. The gap between what they financed and what the car is worth today is the negative equity showing up in this year’s data.

The other part is straightforward affordability pressure. With both vehicle prices and interest rates elevated, a 60-month loan often produces a monthly payment buyers can’t stomach, so dealers and lenders default to stretching the term instead of addressing the actual price or rate. It keeps the payment low enough to close the deal, but it doesn’t make the car cost less, it just moves the pain to the back end, at trade-in or resale.

And once a buyer is underwater and needs to trade in anyway (a new job, a growing family, a car that’s had enough), that negative equity typically gets rolled into the new loan, growing the next loan’s principal from day one. Edmunds’ own analysts describe this as a snowball effect, one long loan creating the conditions for the next one to start further behind.

It’s not just the vehicles you’d expect

One detail worth knowing: negative equity isn’t limited to cars that depreciate unusually fast. Some of the largest dollar amounts of negative equity have shown up on trucks and sedans that traditionally hold their value better than average. The issue increasingly isn’t which car you picked, it’s the loan structure wrapped around it.

What to check before signing an 84-month loan

A few things worth doing before agreeing to stretch a car loan past 72 months:

Run the numbers on a shorter term first, even if the payment looks tighter. If a 60-month term is genuinely out of reach, that’s often a signal the car itself is more than the budget can support, not just a math problem the loan term can quietly fix.

If you have a trade-in, find out its actual current value (not what you think you paid for it) and compare that honestly against your remaining loan balance before you’re standing in a dealership finance office under time pressure.

If you do go long on term, plan for it. Know roughly how many years you’d need to keep the car before you’re no longer underwater, and try not to trade in before that point unless it’s unavoidable.

A bigger down payment shortens the time spent underwater more effectively than almost anything else, since it lowers the starting loan-to-value ratio directly.

The bigger picture

None of this means long-term car loans are always a mistake. Some buyers genuinely plan to keep a vehicle for eight-plus years and the math works out fine for them. The risk is specifically for anyone who might need or want to trade in sooner than the loan term assumes, which, based on this year’s numbers, is a lot of people finding that out the hard way at the worst possible moment: when they’re already at the dealership trying to buy their next car.