We never used the terms “Grandaunt” or “Granduncle” in my family. Uncles of my parents were almost always just referred to as “aunt” or “uncle” with “Great-aunt” or “Great-Uncle” being reserved as greetings on thank you notes or some sort of formal occasion. I knew many of my grandparents’ siblings and I never referred to them as anything other than aunt or uncle. We always knew to whom we were referring–with the exception of Aunt Ruth. There was my Auth Ruth Ufkes (my grandfather’s sister), my aunt Ruth Newman (my grandmother’s sister), and my Aunt Ruthie Ufkes (my grandfather’s sister-in-law).
Of course there are technically correct uses of these terms: aunt/uncle for siblings of your parents, grandaunt/granduncle for siblings of your grandparents, and great-grand aunt/uncle for siblings of your great-grandparents. There is a sense of logic to it and if one wants to be correct, then those are the terms.
But fighting the common usage can be difficult if not impossible and many do not always know the relationship to which each term refers. Even those of us who know the correct terminology may slip and use an incorrect term. And it always begs the question: “if I always called that person ‘Uncle Herschel’ my entire life, should I use that term for him or should I use the correct term of ‘Granduncle Herschel’?”
A good approach would be to refer to him by the correct term and indicate what he was always called and use that term subsequently.