More new-car shoppers are taking on seven-year loans, reflecting the increased cost of financing. Auto loans of seven years or longer accounted for 22% of all new vehicle financing in the third quarter of 2025, a near all-time high according to Edmunds.

The average new-car customer borrowed $42,647 in the third quarter, with an annual interest rate of 7%, resulting in an average monthly payment of $754. Nearly one-fifth of new-car buyers now pay at least $1,000 a month for their vehicles.

Car loans have been getting longer as buyers struggle to keep up with rising prices. Nowadays, buyers have as many financing options for cars as homebuyers do for homes. The Trump administration proposed 50-year home mortgages on Nov. 9, suggesting they could lead to lower monthly payments.

Many cars are losing value faster than the borrower is paying off the loan, leaving them “underwater” or upside-down. The longer the loan, the higher the risk of being stuck in this predicament. Decades ago, three- and four-year car loans were standard.

Interest rates have increased significantly, with the average rate on a five-year new-car loan jumping from 5% in August 2020 to 7.6% in August 2025, based on Federal Reserve data. Longer loans at higher rates are pushing more customers underwater, with one-quarter of customers trading in used vehicles for new ones owing more than the trade-in is worth.

Before committing to a seven-year car loan, consider how the monthly payments will impact your budget over the years, including housing payments, other debt, and unexpected expenses. A big risk with these loans is owing more than the vehicle is worth, but if you plan to keep the car long-term, the negative equity will eventually disappear.

Read more at Yahoo Finance: The 7-year car loan is here. Do you really want to be paying off your car in 2032?