3 years or 5 years? Choosing your loan term
A shorter term saves interest. A longer term frees up cash flow. Here's what the difference actually looks like.
By Hayden Gemmill, Fund 360 · 7 October 2026
The loan term is how long you take to pay the loan back. Vehicle and equipment loans usually run from 1 to 7 years. The trade off is simple: a shorter term means bigger repayments but less interest overall, and a longer term means smaller repayments but more interest overall.
What the difference looks like
Here's a $50,000 loan at an example rate of 8%, with no balloon:
| Term | Monthly | Weekly | Total interest |
|---|---|---|---|
| 3 years | $1,567 | $362 | $6,405 |
| 4 years | $1,221 | $282 | $8,591 |
| 5 years | $1,014 | $234 | $10,829 |
| 7 years | $779 | $180 | $15,462 |
Going from 5 years to 3 years adds about $550 a month, but saves around $4,400 in interest. Stretching to 7 years drops the repayment by about $235 a month, but adds around $4,600 in interest.
When a shorter term makes sense
- Your cash flow can comfortably handle the higher repayments.
- You want to own the vehicle or equipment outright sooner.
- You'd rather pay less interest overall.
When a longer term makes sense
- You want to keep more cash in the business for wages, stock or other costs.
- The asset will keep earning for you over the longer term, like a truck or a machine.
- You'd like the flexibility of smaller repayments, with the option to pay extra if the lender allows it.
Lenders also set limits on the term based on the age of the vehicle or equipment, so older assets may have shorter maximum terms. The figures above are examples only, not rates we're offering.
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This guide is general information only and doesn't take into account your objectives, financial situation or needs. It isn't financial, tax or legal advice. Talk to us about your situation, and to your accountant about tax.