Car Loan Calculator

What is a Car Loan Calculator?

A car loan calculator helps you estimate your monthly auto payments based on the vehicle price, down payment, loan term, and interest rate. It breaks down your payments into principal and interest, helping you understand the true cost of financing a vehicle.

How to Use This Calculator

1. Enter Vehicle Price: Input the total price of the car you want to purchase
2. Set Down Payment: Enter either a dollar amount or percentage of the vehicle price
3. Add Trade-in Value: If you have a car to trade in, enter its value (optional)
4. Choose Loan Term: Select from common terms like 36, 48, 60, or 72 months
5. Enter Interest Rate: Input the annual interest rate offered by your lender
6. Review Results: See your monthly payment, total interest, and total loan cost

Understanding Your Results

Monthly Payment

This is the fixed amount you'll pay each month toward your car loan. It includes both principal (the amount you borrowed) and interest (the cost of borrowing).

Principal vs Interest

• Principal: The portion of your payment that reduces your loan balance
• Interest: The fee charged by the lender for borrowing money

In the early months of your loan, more of your payment goes toward interest. As you progress, more goes toward principal.

Total Interest

The total amount of interest you'll pay over the entire life of the loan. On a 5-year loan, this can be thousands of dollars.

The Formula Behind the Calculation

Monthly Payment Formula: M = P × [r(1+r)^n] / [(1+r)^n – 1]

Where:

• M = Monthly payment
• P = Principal (loan amount after down payment and trade-in)
• r = Monthly interest rate (annual rate ÷ 12)
• n = Total number of payments (months)

Source: Standard amortization formula used by auto lenders.

Key Factors Affecting Your Car Loan

Interest Rate

Your credit score significantly impacts your rate. A difference of even 2-3% can mean thousands more in interest over the loan term.

Loan Term

• Shorter terms (24-48 months): Higher monthly payments, less total interest
• Longer terms (60-84 months): Lower monthly payments, more total interest, risk of being "upside down" on the loan

Down Payment

A larger down payment means borrowing less, which reduces both your monthly payment and total interest paid.

Trade-in Value

Trading in your old vehicle reduces the amount you need to finance, similar to a down payment.

Frequently Asked Questions

What credit score do I need for a car loan?

While you can get a car loan with almost any credit score, better scores (700+) typically qualify for the best rates. Scores below 600 may face rates of 15% or higher.

What's a good interest rate for a car loan?

For new cars, rates typically range from 4-7% for buyers with good credit. Used car rates are usually 1-2% higher.

How much should I put down on a car?

Financial experts recommend at least 20% for new cars and 10% for used cars to avoid being "upside down" on your loan.

Should I choose a longer loan term?

While longer terms offer lower monthly payments, they cost more in total interest and you risk owing more than the car is worth. Most experts recommend 48-60 months maximum.

Does this include taxes and fees?

You can optionally include sales tax in the calculation. However, registration fees, documentation fees, and other dealer charges may add to your actual payment.

Important Limitations

• This calculator provides estimates only; actual rates depend on your credit and lender
• Does not include gap insurance or extended warranty costs
• Dealer fees and registration costs may add to your total out-of-pocket expense
• Trade-in values are estimates; dealers may offer different amounts

Disclaimer: This calculator provides estimates for educational purposes only. Actual rates and payments may vary. Consult with a qualified auto financing professional for specific advice.