Car Loan Calculator
Calculate payments and see how extra payments reduce interest
Loan Details
Monthly Payment
$489.15
Total Interest: $4349
Loan Summary
Principal$25,000
Total Interest$4349.22
Total Repayment$29349.22
Understanding Car Loans
A car loan is an installment loan used to purchase a vehicle, where you make fixed monthly payments over a set term until the loan is paid off.
| Loan Term | Typical APR (Good Credit) | Monthly Payment ($30K loan) | Total Interest | Best For |
|---|---|---|---|---|
| 36 months | 5.0-6.5% | $899 | $2,364 | Minimizing total cost |
| 48 months | 5.5-7.0% | $690 | $3,120 | Balanced approach |
| 60 months | 6.0-7.5% | $566 | $3,960 | Lower payments |
| 72 months | 6.5-8.5% | $487 | $5,064 | Stretching budget |
| 84 months | 7.0-9.5% | $432 | $6,288 | Not recommended |
Car Loan Payment Formula
The standard amortization formula calculates your monthly payment:
| Variable | Symbol | Description | Example |
|---|---|---|---|
| Monthly Payment | M | Fixed amount paid each month | $566.14 |
| Principal | P | Loan amount after down payment | $30,000 |
| Monthly Interest Rate | r | Annual rate ÷ 12 | 0.06/12 = 0.005 |
| Number of Payments | n | Loan term in months | 60 months |
| Total Interest | I | (M × n) - P | $3,968 |
| Total Cost | T | M × n | $33,968 |
Loan Payment
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Total Interest = (M × n) - P
Total Cost = Down Payment + (M × n)
Where:
- M= Monthly payment
- P= Principal (loan amount)
- r= Monthly interest rate
- n= Number of payments
Car Loan Rates by Credit Score
Your credit score significantly impacts the interest rate you'll receive:
| Credit Score | Rating | New Car APR | Used Car APR | Monthly Payment ($30K/60mo) |
|---|---|---|---|---|
| 750-850 | Excellent | 4.5-6.0% | 5.5-7.5% | $552-$566 |
| 700-749 | Good | 6.0-8.0% | 7.5-10.0% | $566-$593 |
| 650-699 | Fair | 8.0-12.0% | 10.0-15.0% | $593-$666 |
| 600-649 | Poor | 12.0-17.0% | 15.0-20.0% | $666-$750 |
| Below 600 | Bad | 17.0-25.0% | 20.0-30.0% | $750-$880 |
Rates vary by lender, vehicle age, and market conditions. Shop multiple lenders for best rate.
How Down Payment Affects Your Loan
A larger down payment reduces your loan amount, monthly payments, and total interest:
| Down Payment | Loan Amount | Monthly Payment | Total Interest | Benefit |
|---|---|---|---|---|
| 0% ($0) | $35,000 | $660 | $4,600 | None - highest risk of being upside down |
| 10% ($3,500) | $31,500 | $594 | $4,140 | $460 interest savings |
| 20% ($7,000) | $28,000 | $528 | $3,680 | $920 savings, avoids being underwater |
| 30% ($10,500) | $24,500 | $462 | $3,220 | $1,380 savings, strong equity position |
| 50% ($17,500) | $17,500 | $330 | $2,300 | $2,300 savings, minimal risk |
Based on $35,000 vehicle, 6% APR, 60-month term.
True Cost of Car Ownership
Your loan payment is just part of the total cost. Factor in all expenses:
| Expense Category | Annual Cost Range | 5-Year Total | Notes |
|---|---|---|---|
| Loan payments | $4,800-$7,200 | $24,000-$36,000 | Depends on loan amount and terms |
| Insurance | $1,200-$3,000 | $6,000-$15,000 | Full coverage required for financed cars |
| Fuel | $1,500-$3,000 | $7,500-$15,000 | Based on 12,000 miles/year |
| Maintenance | $500-$1,200 | $2,500-$6,000 | Oil, tires, brakes, fluids |
| Registration/taxes | $200-$800 | $1,000-$4,000 | Varies by state |
| Depreciation | $2,000-$5,000 | $10,000-$25,000 | Value lost (not a payment) |
New vs. Used Car Financing
Compare financing options for new and used vehicles:
| Factor | New Car | Used Car (3 years old) | Certified Pre-Owned |
|---|---|---|---|
| Typical price | $35,000-$50,000 | $18,000-$30,000 | $22,000-$38,000 |
| Interest rate | Lower (5-7%) | Higher (7-12%) | Moderate (6-9%) |
| Available terms | Up to 84 months | Up to 60-72 months | Up to 72 months |
| Depreciation year 1 | 15-25% | 10-15% | 10-15% |
| Manufacturer incentives | 0% APR offers common | Rare | Sometimes available |
| Warranty | 3-5 year included | None/expired | Extended warranty included |
How Much Car Can You Afford?
Financial guidelines for determining affordable car payments:
| Monthly Income | 10% Rule (Payment) | 20% Rule (Total Costs) | Max Vehicle Price |
|---|---|---|---|
| $4,000 | $400 | $800 (all car costs) | ~$20,000-$25,000 |
| $5,000 | $500 | $1,000 (all car costs) | ~$25,000-$32,000 |
| $6,000 | $600 | $1,200 (all car costs) | ~$30,000-$38,000 |
| $7,500 | $750 | $1,500 (all car costs) | ~$38,000-$48,000 |
| $10,000 | $1,000 | $2,000 (all car costs) | ~$50,000-$65,000 |
The 10% rule: car payment only. The 20% rule: includes insurance, gas, maintenance. Choose based on other debt obligations.
Worked Examples
Calculate Monthly Car Payment
Problem:
You're financing $28,000 at 6.5% APR for 60 months. What's your monthly payment and total cost?
Solution Steps:
- 1Convert annual rate to monthly: r = 6.5% ÷ 12 = 0.5417% = 0.005417
- 2Number of payments: n = 60
- 3Apply formula: M = 28000 × [0.005417(1.005417)^60] / [(1.005417)^60 - 1]
- 4Calculate: M = 28000 × [0.005417 × 1.3829] / [1.3829 - 1]
- 5M = 28000 × 0.007489 / 0.3829 = $547.68
- 6Total paid: $547.68 × 60 = $32,861
- 7Total interest: $32,861 - $28,000 = $4,861
Result:
Monthly payment: $547.68. Total interest paid: $4,861. Total cost: $32,861
Compare Loan Terms
Problem:
Compare a $25,000 loan at 6% APR for 48 months vs. 72 months.
Solution Steps:
- 148-month loan: M = $587.13/month
- 2Total paid: $587.13 × 48 = $28,182
- 3Interest: $28,182 - $25,000 = $3,182
- 472-month loan: M = $414.32/month
- 5Total paid: $414.32 × 72 = $29,831
- 6Interest: $29,831 - $25,000 = $4,831
Result:
48 months: $587/mo, $3,182 interest. 72 months: $414/mo, $4,831 interest. The shorter term saves $1,649
Impact of Down Payment
Problem:
You're buying a $32,000 car with 7% APR for 60 months. Compare 10% vs. 20% down payment.
Solution Steps:
- 110% down ($3,200): Loan = $28,800
- 2Payment: $570.13/month, Total interest: $6,208
- 320% down ($6,400): Loan = $25,600
- 4Payment: $506.78/month, Total interest: $5,207
- 5Difference: $63.35/month lower, $1,001 less interest
Result:
20% down saves $1,001 in interest and reduces monthly payment by $63 compared to 10% down
Tips & Best Practices
- ✓Get pre-approved before car shopping—knowing your rate helps you negotiate and avoid dealer markup
- ✓Follow the 20/4/10 rule: 20% down payment, 4-year maximum term, and total car costs under 10% of gross income
- ✓Never focus solely on monthly payment—dealers can stretch terms to make expensive cars seem affordable
- ✓Check your credit report 30 days before applying and dispute any errors that could hurt your rate
- ✓Compare at least 3 lenders: your bank, a credit union, and the dealer's financing offer
- ✓Time your purchase for end of month, quarter, or year when dealers are motivated to meet quotas
- ✓Read the loan contract carefully before signing—verify the APR, term, and total amount financed match what you negotiated
Frequently Asked Questions
Aim for at least 20% down on new cars and 10% on used cars. A larger down payment reduces your loan amount, monthly payments, and total interest. More importantly, it helps prevent being 'underwater' (owing more than the car is worth), which can happen quickly due to depreciation. If you can't afford 20% down, consider a less expensive vehicle or waiting until you've saved more.
While longer terms (72-84 months) lower monthly payments, they significantly increase total interest and risk being underwater. A 72-month loan on a $30,000 car at 7% costs about $1,900 more in interest than a 48-month loan. You'll also likely need major repairs while still making payments. Aim for the shortest term you can comfortably afford, ideally 48-60 months maximum.
Always get pre-approved by your bank or credit union before visiting dealerships. This gives you a baseline rate to compare against dealer financing. Dealers can sometimes offer better rates (especially 0% APR promotions on new cars), but they may also mark up rates. Having pre-approval also strengthens your negotiating position and separates the price negotiation from financing discussion.
The loan amount typically includes: vehicle price minus down payment/trade-in, sales tax (unless paid upfront), documentation fees ($100-$500), registration/title fees, and any add-ons (warranty, gap insurance). Avoid rolling negative equity from a trade-in into the new loan—it dramatically increases your underwater risk. Always negotiate the 'out-the-door' price before discussing financing.
If you have extra funds and no higher-interest debt, paying off early saves interest. However, check for prepayment penalties (rare but possible) and consider the opportunity cost. If your car loan is 5% APR but you could earn 7% investing, mathematically you're better off investing. Most people benefit from paying extra toward their car loan after eliminating credit card debt and building emergency savings.
Gap insurance covers the difference between what you owe and what your car is worth if it's totaled or stolen. You need it if: your down payment is less than 20%, your loan term is over 60 months, or your car depreciates faster than average. Gap coverage typically costs $20-$40/year through your auto insurer (much cheaper than dealer gap insurance at $500-$700). Once your loan balance drops below your car's value, cancel the gap coverage.
Sources & References
Last updated: 2026-01-22