Car Loan Calculator

Car loan payments are calculated using the standard amortizing loan formula, the same mathematics used for mortgages and personal loans.

Monthly payment formula: Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]

Where:

• P = Principal (vehicle price minus down payment)
• r = Monthly interest rate = Annual rate ÷ 12
• n = Total number of monthly payments (years × 12)

Total cost and interest paid: Total Paid = Monthly Payment × n Total Interest = Total Paid − Principal

Worked example: Vehicle price: $32,000. Down payment: $4,000. Loan: $28,000. APR: 6.5% → monthly rate r = 6.5% ÷ 12 = 0.5417%. Term: 60 months. Payment = 28,000 × [0.005417 × (1.005417)^60] / [(1.005417)^60 − 1] (1.005417)^60 ≈ 1.3828 Payment = 28,000 × [0.005417 × 1.3828] / [1.3828 − 1] Payment = 28,000 × 0.007490 / 0.3828 ≈ $548/month Total paid = $548 × 60 = $32,880. You pay $4,880 in interest.

Typical auto loan rates (2025–2026):

• Excellent credit (720+): 4–6%
• Good credit (660–719): 6–8%
• Fair credit (600–659): 8–12%
• New cars generally 1–2% lower than used cars

Money-saving tips:

• A 20% down payment prevents being “underwater” on the loan
• Keep terms to 60 months or less; 72–84 month loans cost significantly more in interest
• Rates from credit unions are often 1–2% below dealership financing

APR vs interest rate — what’s the difference?

Always compare loans by APR (Annual Percentage Rate), not the headline interest rate. The APR includes both the base interest rate AND any lender fees, dealer fees, and required insurance baked into the loan. Two loans at the same 5.9% interest rate can carry very different APRs once fees are folded in. Federal law requires lenders to disclose the APR, so if a dealer only shows you the rate, ask for the APR before signing.

Step-by-step worked example with trade-in:

Vehicle price: $32,000. Down payment: $5,000. Trade-in value: $3,000. APR: 6.5%. Term: 60 months.

• Principal: $32,000 − $5,000 − $3,000 = $24,000
• Monthly rate: 6.5% ÷ 12 = 0.005417
• n = 60 months
• (1.005417)^60 ≈ 1.3831
• Payment: 24,000 × (0.005417 × 1.3831) / (1.3831 − 1) = 24,000 × 0.01957 ≈ $469.67/month
• Total of all payments: $469.67 × 60 = $28,180
• Total interest paid: $28,180 − $24,000 = $4,180

Stretch the same loan to 84 months and the monthly payment drops to about $353 but total interest jumps to about $5,670. That extra $1,490 in interest is the price you pay for the smaller monthly bill: money that buys nothing for you and never comes back.