An auto loan is a loan taken out to purchase a vehicle. The loan amount is the price of the car (minus any down payment), and you repay it over a set period with interest. The monthly payment is the most crucial figure for budgeting, as it represents the recurring cost of owning the vehicle.
Calculating your auto loan payment accurately helps you understand the true cost of the car and ensure it fits your budget. This calculator uses the standard loan amortization formula to provide an estimate of your monthly payment, the total interest you'll pay over the life of the loan, and the total cost of the vehicle.
How is the Monthly Payment Calculated?
The monthly payment (M) for an auto loan is calculated using the following formula, which is a standard formula for amortizing loans:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly loan payment
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate. This is the annual interest rate divided by 12. For example, a 6% annual rate becomes 0.06 / 12 = 0.005 per month.
n = The total number of payments over the loan's lifetime. This is the loan term in years multiplied by 12. For example, a 5-year loan has 5 * 12 = 60 payments.
The calculator first converts your annual interest rate to a monthly rate and the loan term in years to the total number of months. It then plugs these values into the formula to determine your monthly payment.
Additional Calculations:
Beyond the monthly payment, it's useful to know the total cost of the loan and the amount of interest paid:
Total Cost = Monthly Payment (M) * Number of Payments (n)
Total Interest Paid = Total Cost – Principal Loan Amount (P)
Understanding these figures helps you appreciate the long-term financial commitment of an auto loan and can guide you in negotiating better loan terms.
Factors Affecting Your Auto Loan Payment:
Loan Amount: A larger loan amount will result in higher monthly payments.
Interest Rate (APR): A higher interest rate significantly increases your monthly payments and the total interest paid. Even a small difference in APR can amount to thousands of dollars over the life of the loan.
Loan Term: A longer loan term (more years) will result in lower monthly payments, but you will pay substantially more in interest over time. Conversely, a shorter term means higher monthly payments but less interest paid overall.
Down Payment: A larger down payment reduces the principal loan amount, thus lowering your monthly payments and the total interest.
Credit Score: Your creditworthiness heavily influences the interest rate you'll be offered. A higher credit score generally leads to a lower APR.
Use this calculator to experiment with different scenarios and find the auto loan that best suits your financial situation.
function calculateAutoLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTerm").value);
var monthlyPaymentElement = document.getElementById("monthlyPayment");
var totalInterestElement = document.getElementById("totalInterest");
var totalCostElement = document.getElementById("totalCost");
// Clear previous results and set default text
monthlyPaymentElement.innerText = "$0.00";
totalInterestElement.innerText = "Total Interest: $0.00";
totalCostElement.innerText = "Total Cost: $0.00";
// Input validation
if (isNaN(loanAmount) || loanAmount <= 0) {
alert("Please enter a valid Loan Amount greater than zero.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid Annual Interest Rate (0% or greater).");
return;
}
if (isNaN(loanTermYears) || loanTermYears 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// If interest rate is 0%, payment is simply principal divided by number of payments
monthlyPayment = loanAmount / numberOfPayments;
}
var totalCost = monthlyPayment * numberOfPayments;
var totalInterest = totalCost – loanAmount;
// Format currency
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2,
maximumFractionDigits: 2,
});
monthlyPaymentElement.innerText = formatter.format(monthlyPayment);
totalInterestElement.innerText = "Total Interest: " + formatter.format(totalInterest);
totalCostElement.innerText = "Total Cost: " + formatter.format(totalCost);
}