6 reasons to avoid extra-long auto loans

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Auto dealers are promoting car loans of up to 84 months as a way to lower monthly payments and squeeze buyers into high-end models.

But here's a good rule of thumb for anyone in the market for a new car or truck: If you can't afford to pay it off in 60 months or less, you can't afford it. Period.

You'll almost certainly regret stretching your payments out to six or seven years. That kind of financing can easily launch you into a never-ending cycle of auto payments.

As Jack Nerad, executive editorial director and market analyst for Kelley Blue Book, puts it: "Be willing to get what you can afford or you'll always be in debt."

Here are the six reasons to avoid extra-long auto loans:

Reason 1. You'll pay thousands more in interest.

Longer auto loans have higher interest rates and you'll be paying that higher rate over a longer period.

For example, a Cadillac CTS at $34,000 in a 60-month loan at 7% interest will cost you $673 a month. Over the life of the auto loan, you'll pay about $6,400 in interest.

The same car will cost you $560 a month if you get an 84-month loan at 9.7% interest. (Longer loans always charge higher interest rates.)

You can serach our database to compare the best auto loan rates from scores of lenders, and from 36- to 72-months in length.

But by the time the car is paid off, you'll have spent $13,000, or more than twice as much, in interest.

The interest you pay on an auto loan is not tax deductible, so there's no benefit to you.

Reason 2. You'll probably want a new car before the current one is paid off.

Dealers typically use long-term loans to squeeze buyers into luxury cars, big pickups and full-size sport-utility vehicles that cost $30,000 or more.

While those are very nice rides, the experts at Kelley Blue Book say most drivers still want to get a new car every three to five years, or about the time vehicles begin to need more extensive, not to mention expensive, maintenance.

With an extra-long car loan, however, you're still years away from getting the pink slip.

Reason 3. You'll be upside-down on your loan most of the time you're paying it off.

Though you're reducing your debt slowly, your new car or truck will depreciate quickly -- losing 20% to 30% of its value in the first year alone.

With a 60-month auto loan, it's not uncommon to owe more than your car is worth for the first couple of years. With an 84-month auto loan, you'll be in that unenviable position until your sixth or seventh year of payments.

Let's say you take out an 84-month loan on a Toyota Highlander. At $28,225 and a 9.7% interest rate, you'll still owe roughly $18,400 after three years. Try to trade it in and the dealer will give you $15,000, if it's in good condition.

Or what about the Cadillac CTS? If you kept it for five years, you'll still owe $12,155 but can only expect to get about $10,500 when you trade it in.

Reason 4. You could still be paying for your car after you get rid of it.

You'll have to roll the difference between what you owe and what your car is worth into the auto loan on your next car.

Using our two examples, you'll have to carry over $3,400 in debt on the Highlander and $1,655 on the CTS.

Car payments would become a never-ending drain on your budget, and the extra debt would make it that much harder to afford the payments on your next car. You could easily be forced to trade down to a less-costly model.

Imagine how you'd feel driving around in a RAV4 or Chevrolet Malibu while making payments worthy of a Highlander or CTS.

Reason 5. The other options aren't all that great, either.

Of course, you can get more for your car or truck if you try to sell it yourself. You may even be able to command a high enough price to cover your note. But if you can't, you'll have to make up the difference out of your pocket before your lender will release the title.

Either way, you won't reap the financial rewards of buying a new car -- paying it off and going a year or two without payments, or selling it and having money for a down payment on your next vehicle.

To obtain any of those benefits, you'll have to stick out the auto loan to the bitter end and hope you don't have any serious mechanical problems after the warranty expires -- the kind of problems that can eat up the modest resale value of any six- or seven-year-old vehicle.

Reason 6. If the payments don't kill you, the operating costs will.

Many buyers tempted to use long-term car loans are so fixated on the payments that they don't take into account how much their expensive cars and trucks will cost to run.

Insurance on a $30,000 vehicle is substantial, and most lenders will require you to carry full protection until the vehicle is paid off. Have a wreck and your premiums could go higher than you'd ever expect.

Filling up a big pickup or SUV typically costs $70 to $90.

And finally, with the economy emerging from a recession, this is a bad time to be taking on more debt -- especially more debt than you can afford. It never hurts to be conservative in your spending.