If an auto loan term is extended from 36 months to 60 months at a fixed interest rate, what is the likely effect on the payment?

Extending an auto loan term from 36 months to 60 months generally leads to lower monthly payments. This is because the total amount borrowed is spread out over a longer period. When you lengthen the loan term, the principal amount owed is divided by more months, which reduces the size of each individual payment.

Although extending the term can result in paying more interest over the life of the loan, the immediate effect on the monthly payment itself is a decrease. Thus, the correct answer is that payments will decrease.

Understanding how loan terms impact payment amounts is crucial for financial planning, as it directly affects affordability and the total cost of the vehicle over time.