Auto Loan Calculator
Estimate your monthly car payments and total interest costs.
36 Months (3 Years)
48 Months (4 Years)
60 Months (5 Years)
72 Months (6 Years)
84 Months (7 Years)
Estimated Monthly Payment
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Total Loan Amount
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Total Interest
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Total Cost (w/ Tax)
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Understanding Your Auto Loan Options
Purchasing a vehicle is one of the most significant financial commitments most people make, second only to buying a home. Before walking into a dealership, it is crucial to understand exactly how financing works. This Auto Loan Calculator helps you estimate your monthly payments, total loan costs, and the impact of interest rates and down payments on your budget.
How Car Loan Interest is Calculated
Car loans typically use simple interest, meaning you pay interest on the principal balance owed. As you make payments over time, the principal decreases, and consequently, the portion of your payment going toward interest decreases as well. The formula used in this calculator considers your Annual Percentage Rate (APR), the loan term (length of the loan), and the total amount financed.
Key Factors Affecting Your Monthly Payment
- Vehicle Price: The negotiated price of the car before taxes and fees.
- Trade-In & Down Payment: Any cash you pay upfront or value from your old car directly reduces the loan principal. A larger down payment significantly lowers your monthly obligation and total interest paid.
- Sales Tax: Often overlooked, state and local sales taxes are usually added to the total loan amount unless paid upfront.
- Loan Term: Longer terms (e.g., 72 or 84 months) result in lower monthly payments but increase the total interest paid over the life of the loan. Shorter terms save money in the long run but require higher monthly cash flow.
- Interest Rate (APR): Determined by your credit score and current market rates. Even a 1% difference can save or cost you hundreds of dollars.
The 20/4/10 Rule for Car Buying
Financial experts often recommend the 20/4/10 rule to ensure car affordability. This rule suggests that you should:
- Put down at least 20% of the purchase price.
- Finance the vehicle for no more than 4 years (48 months).
- Keep total monthly transportation costs (including insurance and gas) under 10% of your gross monthly income.
Use the calculator above to adjust your vehicle price and down payment to see if your potential purchase fits within these healthy financial guidelines.
Why You Should Avoid Long-Term Loans
While 72-month and 84-month loans are becoming popular because they lower monthly payments, they carry higher risk. Vehicles depreciate rapidly. With a long-term loan, you stay "underwater" (owing more than the car is worth) for a longer period. If the car is totaled or you need to sell it, you might have to pay out of pocket to close the loan. Aim for the shortest term you can comfortably afford.