An auto loan is a type of loan used to finance the purchase of a new or used vehicle.
You borrow a sum of money from a lender (like a bank, credit union, or dealership) and agree
to repay it over a fixed period, typically in monthly installments. Each payment usually
covers both a portion of the principal (the original amount borrowed) and the interest accrued.
The key components of an auto loan are:
Loan Amount (Principal): The total amount of money you are borrowing to buy the car.
Annual Interest Rate (APR): The yearly cost of borrowing money, expressed as a percentage. A lower APR means less interest paid over time.
Loan Term: The length of time you have to repay the loan, usually expressed in months or years. A longer term means lower monthly payments but more interest paid overall.
The Math Behind the Monthly Payment
The standard formula for calculating the monthly payment (M) of an amortizing loan is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
n = Total number of payments (Loan Term in Months)
The Power of Extra Payments
Paying extra on your auto loan can significantly reduce the total interest you pay and shorten the life of your loan.
When you make an extra payment, it's typically applied directly to the principal balance. This reduces the
amount on which future interest is calculated. The impact is amplified over time due to the compounding
nature of interest.
Our calculator helps you visualize this benefit. By entering an "Extra Monthly Payment," you can see how much
sooner you'll pay off your loan and how much money you'll save on interest compared to making only the
minimum required payments.
How the Calculator Works
1. Standard Payment Calculation: First, it calculates your regular monthly payment using the formula above.
2. Amortization with Extra Payments: It then simulates the loan's amortization schedule, month by month,
incorporating your regular payment plus the additional amount you've chosen to pay.
3. Tracking Progress: The calculator tracks the principal balance, interest paid, and the number of months
it takes to reach a zero balance with the extra payments.
4. Comparison: Finally, it compares the outcome with extra payments (payoff time, total interest)
against the outcome without extra payments to quantify the savings in time and money.
Use this tool to experiment with different extra payment amounts and understand how even a small additional
payment can make a big difference in your financial journey.
function calculateLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermMonths = parseFloat(document.getElementById("loanTermMonths").value);
var extraPaymentMonthly = parseFloat(document.getElementById("extraPaymentMonthly").value);
var resultsDiv = document.getElementById("results");
resultsDiv.style.display = "block"; // Ensure results are visible
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(loanTermMonths) || loanTermMonths <= 0 ||
isNaN(extraPaymentMonthly) || extraPaymentMonthly < 0) {
document.getElementById("monthlyPayment").innerHTML = "Please enter valid positive numbers for all fields.";
document.getElementById("totalInterestPaid").innerHTML = "";
document.getElementById("totalAmountPaid").innerHTML = "";
document.getElementById("loanPaidOffInMonths").innerHTML = "";
document.getElementById("timeSavedMonths").innerHTML = "";
document.getElementById("interestSaved").innerHTML = "";
return;
}
var monthlyInterestRate = (annualInterestRate / 100) / 12;
var standardMonthlyPayment;
var totalInterestPaidStandard = 0;
var totalAmountPaidStandard = 0;
var numberOfMonthsStandard = loanTermMonths;
// Calculate standard monthly payment (without extra payments)
if (monthlyInterestRate > 0) {
standardMonthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, loanTermMonths)) / (Math.pow(1 + monthlyInterestRate, loanTermMonths) – 1);
} else {
standardMonthlyPayment = loanAmount / loanTermMonths;
}
// Calculate standard loan details for comparison
var balanceStandard = loanAmount;
for (var i = 0; i < loanTermMonths; i++) {
var interestThisMonth = balanceStandard * monthlyInterestRate;
var principalThisMonth = standardMonthlyPayment – interestThisMonth;
totalInterestPaidStandard += interestThisMonth;
balanceStandard -= principalThisMonth;
if (balanceStandard 0) {
monthsWithExtra++;
var interestThisMonth = balanceWithExtra * monthlyInterestRate;
var principalPayment = standardMonthlyPayment – interestThisMonth;
var totalPaymentThisMonth = standardMonthlyPayment + extraPaymentMonthly;
// Ensure total payment does not exceed remaining balance + interest
if (totalPaymentThisMonth > balanceWithExtra + interestThisMonth) {
totalPaymentThisMonth = balanceWithExtra + interestThisMonth;
principalPayment = totalPaymentThisMonth – interestThisMonth;
}
balanceWithExtra -= principalPayment;
totalInterestPaidWithExtra += interestThisMonth;
if (balanceWithExtra 9999) { // Safety break for potential infinite loops with unusual inputs
document.getElementById("monthlyPayment").innerHTML = "Calculation error: Loop limit exceeded. Check inputs.";
document.getElementById("totalInterestPaid").innerHTML = "";
document.getElementById("totalAmountPaid").innerHTML = "";
document.getElementById("loanPaidOffInMonths").innerHTML = "";
document.getElementById("timeSavedMonths").innerHTML = "";
document.getElementById("interestSaved").innerHTML = "";
return;
}
}
// Correct total interest for potential overpayment in last month
var actualTotalPaidWithExtra = loanAmount + totalInterestPaidWithExtra;
if (actualTotalPaidWithExtra > totalPaymentMade) {
totalInterestPaidWithExtra = totalPaymentMade – loanAmount;
}
var timeSavedMonths = loanTermMonths – monthsWithExtra;
var interestSaved = totalInterestPaidStandard – totalInterestPaidWithExtra;
document.getElementById("monthlyPayment").innerHTML = "Estimated Monthly Payment: $" + standardMonthlyPayment.toFixed(2) + " (plus $" + extraPaymentMonthly.toFixed(2) + " extra)";
document.getElementById("totalInterestPaid").innerHTML = "Total Interest Paid (with extra): $" + totalInterestPaidWithExtra.toFixed(2) + "";
document.getElementById("totalAmountPaid").innerHTML = "Total Amount Paid (with extra): $" + totalPaymentMade.toFixed(2) + "";
document.getElementById("loanPaidOffInMonths").innerHTML = "Loan Paid Off In: " + monthsWithExtra + " months";
document.getElementById("timeSavedMonths").innerHTML = "Time Saved: " + timeSavedMonths + " months";
document.getElementById("interestSaved").innerHTML = "Interest Saved: $" + interestSaved.toFixed(2) + "";
}