Car Loan Calculator: Auto Loan Payment Calculator
Table of Contents - Car Loan
- How to Use This Calculator
- The Core Principle: Amortization
- How to Calculate Car Loan Payments Manually
- Real-World Applications
- Scenarios People Actually Run Into
- Trade-Offs and Decisions People Underestimate
- Common Mistakes and How to Recover
- Related Topics
- How This Calculator Works
- FAQs
How to Use This Calculator - Car Loan
Enter the Vehicle Price—the total cost of the car before any reductions.
Enter your Down Payment—the amount you'll pay upfront. A larger down payment reduces the amount financed and monthly payments.
Enter Trade-in Value if you're trading a vehicle. This amount reduces what you need to finance.
Enter the Interest Rate (APR)—the annual percentage rate on the loan. This varies based on credit score, lender, and whether the car is new or used.
Select the Loan Term—common options are 36, 48, 60, 72, or 84 months. Longer terms mean lower payments but more total interest.
Enter Sales Tax rate as a percentage. Tax is typically calculated on the purchase price minus trade-in.
Enter any Additional Fees—documentation, registration, or dealer fees that will be financed.
Click "Calculate" to see results. The output displays: monthly payment, total amount financed, total of all payments, total interest paid, and a breakdown of costs. An amortization schedule shows how each payment splits between principal and interest over the first year.
The Core Principle: Amortization
Car loans are amortizing loans—each payment includes both principal (reducing what you owe) and interest (cost of borrowing). Early payments are mostly interest; later payments are mostly principal.
The standard amortization formula calculates the fixed monthly payment needed to repay a loan over a specific term:
PMT = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ - 1]
Where P is principal (loan amount), r is monthly interest rate (APR ÷ 12), and n is number of payments.
This formula ensures each payment covers that month's interest on the remaining balance, plus enough principal to reach zero at the end of the term.
Because interest is calculated on the remaining balance, paying extra toward principal early in the loan saves significant interest over time. An extra $100/month in year one has more impact than the same extra payment in year four.
How to Calculate Car Loan Payments Manually
Step 1: Determine the loan amount
Loan amount = Vehicle price + Sales tax + Fees - Down payment - Trade-in
Example: Vehicle: $25,000 Sales tax (7%): $1,750 Fees: $500 Down payment: $5,000 Trade-in: $3,000
Loan amount = $25,000 + $1,750 + $500 - $5,000 - $3,000 = $19,250
Step 2: Calculate monthly interest rate
Monthly rate = APR ÷ 12 ÷ 100
Example: 6% APR Monthly rate = 6 ÷ 12 ÷ 100 = 0.005
Step 3: Calculate number of payments
For a 60-month loan: n = 60
Step 4: Apply the formula
PMT = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ - 1] PMT = $19,250 × [0.005(1.005)⁶⁰] / [(1.005)⁶⁰ - 1] PMT = $19,250 × [0.005 × 1.349] / [1.349 - 1] PMT = $19,250 × 0.006745 / 0.349 PMT = $19,250 × 0.01933 PMT = $372.10
Step 5: Calculate total cost
Total payments = $372.10 × 60 = $22,326 Total interest = $22,326 - $19,250 = $3,076
Real-World Applications
Budgeting for vehicle purchase. Before shopping, know what payment fits your budget. Work backward: if you can afford $400/month, what loan amount does that support at current rates?
Comparing financing offers. Dealers, banks, and credit unions offer different rates. Calculate payments for each option to find the best total cost, not just the lowest monthly payment.
Trade-off analysis. Should you choose 60 months at $372 or 72 months at $320? The calculator shows that the longer term saves $52/month but costs $2,000+ more in total interest.
Down payment strategy. How much does increasing down payment by $2,000 affect monthly payments and total cost? The calculator helps optimize this trade-off.
Refinancing evaluation. If rates have dropped or your credit improved, calculate potential savings from refinancing. Compare new total interest against current remaining interest.
Scenarios People Actually Run Into
The payment-focused trap. A dealer offers an "affordable" $299/month payment. That sounds great until you realize it's an 84-month loan on a car that'll need major repairs before it's paid off. Low payments can hide expensive loans.
The underwater surprise. You financed $30,000 on a $28,000 car (100%+ financing). After two years, you owe $24,000 but the car's worth $18,000. You're $6,000 underwater—can't sell without bringing cash to close the deal.
The rate shock. Credit score is 620. The dealer's 18% rate makes your $25,000 car cost $35,000+ over the loan term. Working on credit before buying could save thousands.
The term creep. You started shopping for a 48-month loan but "needed" a larger payment to "fit your budget" (the dealer's words). Now you're in a 72-month loan on a car you'll want to replace in 4 years.
The GAP insurance moment. You totaled your car in year two. Insurance paid $16,000 actual value. You still owe $19,000. Without GAP coverage, you're writing a $3,000 check for a car you can't drive.
Trade-Offs and Decisions People Underestimate
Term length trade-offs. Shorter terms mean higher payments but lower total interest and faster equity building. Longer terms reduce payments but cost more overall and keep you in debt longer.
Down payment versus liquidity. A larger down payment reduces interest cost but depletes cash reserves. Keep emergency funds intact; don't drain savings for a larger down payment.
New versus used financing. New cars get better rates but depreciate faster. Used cars cost less but often have higher rates. The lowest total cost of ownership isn't always obvious.
Rate versus incentives. A manufacturer offers 0% financing OR a $3,000 rebate with regular financing. Which is better? It depends on loan amount, term, and available rates. Calculate both scenarios.
Early payoff impact. Paying off early saves interest but verify there's no prepayment penalty. Some loans use precomputed interest where early payoff doesn't save as much as expected.
Common Mistakes and How to Recover
Focusing only on monthly payment. A $350 payment for 60 months ($21,000 total) beats a $300 payment for 84 months ($25,200 total) even though the monthly is higher. Compare total cost, not just payments.
Skipping the down payment. Financing 100%+ of a car's value starts you underwater immediately. The car depreciates faster than you pay down the loan. Aim for at least 10-20% down.
Ignoring the APR. Different lenders offer vastly different rates. A 6% versus 9% APR on $25,000 for 60 months costs $2,000+ more. Shop rates at credit unions, banks, and online lenders before visiting dealerships.
Financing for too long. A car loan shouldn't outlast the car's reliable lifespan. Financing a used car for 72 months often means paying for a car that needs expensive repairs while still making payments.
Rolling negative equity. You're $3,000 underwater on your current car. The dealer offers to "pay it off" by adding that $3,000 to your new loan. Now you're starting $3,000 underwater again, in a deeper hole.
Related Topics
Loan-to-value ratio. The percentage of the car's value that you're financing. Below 100% means you have equity; above 100% means you're underwater. Aim to stay below 100% from day one.
Credit score impact. Your credit score heavily influences available rates. Scores above 720 get the best rates; below 600 may face rates above 15% or loan denial.
Preapproval. Getting preapproved by a bank or credit union before shopping establishes your rate and gives negotiating leverage. Dealer financing must beat your preapproval to earn your business.
Simple versus compound interest. Car loans typically use simple interest calculated on remaining balance. Some predatory loans use precomputed interest that doesn't benefit from early payoff.
GAP insurance. Covers the "gap" between what you owe and what insurance pays if the car is totaled. Essential when financing more than 80% of value or on long-term loans.
How This Calculator Works
The calculator takes vehicle price, down payment, trade-in value, interest rate, loan term, sales tax, and fees.
Tax calculation: Taxable amount = Vehicle price - Trade-in value Tax = Taxable amount × (Tax rate ÷ 100)
Loan amount: Loan = Vehicle price + Tax + Fees - Down payment - Trade-in
Monthly payment (amortization formula): r = (Interest rate ÷ 100) ÷ 12 n = Term × 12 PMT = Loan × [r(1 + r)ⁿ] / [(1 + r)ⁿ - 1]
Total payments: Total = PMT × n
Total interest: Interest = Total payments - Loan amount
Amortization schedule: For each month:
- Interest portion = Remaining balance × Monthly rate
- Principal portion = Payment - Interest portion
- New balance = Previous balance - Principal portion
Affordability analysis: Based on 15% of income guideline for vehicle expenses.
All calculations happen locally in your browser.
FAQs
What's a good interest rate for a car loan?
For new cars with excellent credit (750+): 4-6%. Good credit (700-749): 6-8%. Fair credit (650-699): 8-12%. Below 650: rates climb quickly above 15%.
How much should I put down?
At least 10-20% of the purchase price. This reduces the loan amount, lowers payments, and helps prevent being underwater if the car depreciates faster than expected.
What loan term is best?
The shortest term you can afford. 48-60 months balances payment affordability with reasonable total interest. Avoid 72-84 month loans—you'll pay thousands more in interest and likely want a new car before payoff.
Should I pay cash or finance?
If rates are low (under 4-5%), investing your cash might earn more than the loan costs. At higher rates, paying cash or larger down payment makes more sense. Keep emergency funds regardless.
Is dealer financing or bank financing better?
Compare both. Dealers sometimes offer promotional rates (0%, 1.9%) that beat banks. Other times they mark up rates for profit. Get preapproved elsewhere first to have a comparison baseline.
Can I pay off my car loan early?
Usually yes. Most simple-interest car loans have no prepayment penalty. Verify by reading your loan agreement. Paying extra toward principal reduces total interest.
What if I can't make my payment?
Contact your lender immediately. Options may include payment deferral, loan modification, or refinancing. Ignoring the problem leads to repossession, which damages credit severely.
How does a trade-in affect my loan?
Trade-in value is subtracted from the amount financed, reducing your loan. In most states, it also reduces taxable amount. Getting the best trade-in value directly lowers your new car cost.
What's the difference between simple and precomputed interest?
Simple interest is calculated on the remaining balance—paying early saves interest. Precomputed interest is calculated upfront and added to the loan; early payoff may not save as much. Most modern auto loans use simple interest.
Should I get pre-approved before shopping?
Absolutely. Pre-approval from a bank or credit union establishes your rate and budget, gives you negotiating leverage, and lets you focus on vehicle price rather than payment. The dealer must beat your pre-approved rate to earn your financing business.
What's GAP insurance and do I need it?
GAP (Guaranteed Asset Protection) covers the difference between what you owe and what insurance pays if your car is totaled. You need it if you financed more than 80% of the car's value, have a long loan term, or chose a vehicle that depreciates quickly.
How do I calculate my total cost of ownership?
Add purchase price, total interest paid, sales tax, fees, insurance, fuel, and expected maintenance. Compare this across different vehicles and loan terms. A cheaper car with worse fuel economy may cost more overall than a pricier efficient vehicle.