Final answer:
The better loan depends on one's financial priorities. A 48-month loan saves on total interest, costing $392 less than a 60-month loan. However, the 60-month loan offers lower monthly payments, potentially better for those with tighter budgets.
Step-by-step explanation:
When choosing between a 48-month and a 60-month car loan, it is important to consider both the monthly payment amounts and the total interest paid over the life of the loan. For a $25,000 loan at 3.00% APR, the 48-month term results in a total interest of $1,561, while extending it to 60 months reduces the monthly payment by $104 but increases the total interest to $1,953.
The better loan depends on your financial priorities. If minimizing total interest paid is the goal, then the 48-month loan is better because it saves you $392 in interest compared to the 60-month loan. However, if a lower monthly payment is more important due to budgeting concerns, then the 60-month term might be the preferred option despite the higher total interest cost.
It's important to consider that even though longer loan terms can make monthly payments more manageable, they typically result in higher overall costs due to the accumulation of interest over a longer period. Therefore, evaluating personal financial goals and constraints is critical when selecting a loan term.