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The monthly payment is the wrong thing to optimise

Dealer finance conversations are steered toward the monthly figure because almost any payment can be reached by extending the term. Stretching a loan from 48 to 84 months drops the monthly cost noticeably and increases the total interest substantially, on the same car at the same rate. Compare offers on total cost over the full term, not on the monthly number.

Negative equity is the real risk of long terms

A car depreciates fastest in its first two or three years, typically losing 20 to 30 percent in year one. On a seven-year loan the balance falls more slowly than the value does, so for much of the term you owe more than the car is worth. If it is written off or you need to sell, insurance pays the market value and you remain liable for the shortfall. Gap insurance exists precisely because this situation is common.

APR versus the advertised rate

The flat interest rate quoted on a car loan is not comparable to an APR. A flat rate charges interest on the original amount for the whole term even as you repay it, so a 6 percent flat rate is roughly 11 to 12 percent APR on a typical term. Ask for the APR, which is the only figure that lets you compare finance offers, and include arrangement fees.

Deposit and trade-in

Both reduce the amount financed and therefore the interest, but a trade-in valued generously by a dealer is often offset by a smaller discount on the car. Negotiate the price of the car and the value of the trade-in as separate numbers, otherwise a good figure on one hides a poor one on the other.

Balloon payments

PCP and similar arrangements keep monthly payments low by deferring a large final payment. That final sum is not optional if you want to keep the car, and the effective interest on the deferred amount continues throughout. Include it when comparing against a conventional loan.