Total Interest: $0.00
Total Cost of Loan: $0.00
Calculator Use
The car loan payment calculator is an essential tool for anyone looking to purchase a new or used vehicle. By inputting the vehicle's price, your down payment, any trade-in value, the interest rate, and the length of the loan, you can quickly determine how much you will owe each month. This helps in budgeting and ensures you don't commit to a payment that exceeds your financial means.
This tool also calculates the total interest paid over the life of the loan and the total cost of the vehicle after financing, which are critical metrics for comparing different financing offers.
- Vehicle Price
- The total purchase price of the car, including any dealer add-ons or options.
- Down Payment
- The amount of cash you pay upfront toward the purchase.
- Trade-in Value
- The amount a dealership gives you for your current vehicle, which acts as a credit toward the new car.
- Interest Rate (APR)
- The annual percentage rate charged by the lender for the loan.
- Loan Term
- The duration of the loan in months (e.g., 36, 48, 60, or 72 months).
How It Works
The car loan payment calculator uses the standard amortization formula to calculate the monthly payment. This formula ensures that by the end of the term, both the principal and the accrued interest are paid off in full.
PMT = P * [r(1+r)^n] / [(1+r)^n – 1]
- PMT: Monthly payment
- P: Principal loan amount (Vehicle Price – Down Payment – Trade-in)
- r: Monthly interest rate (Annual Rate divided by 12 months)
- n: Total number of monthly payments (Loan Term)
Calculation Example
Example: Suppose you are buying a car for $30,000. You have a $5,000 down payment and no trade-in. You secure a loan at 6% interest for 60 months.
Step-by-step solution:
- Calculate Principal: $30,000 – $5,000 = $25,000
- Monthly Interest Rate (r): 0.06 / 12 = 0.005
- Number of Payments (n): 60
- Calculate Payment: $25,000 * [0.005(1.005)^60] / [(1.005)^60 – 1]
- Result: $483.32 per month
- Total Interest: ($483.32 * 60) – $25,000 = $3,999.20
Common Questions
How does credit score affect my car loan payment?
Your credit score is the primary factor lenders use to determine your interest rate. Higher credit scores typically qualify for lower interest rates, which directly reduces your monthly payment and the total interest paid over the life of the loan. Using a car loan payment calculator allows you to see how much even a 1% difference in APR can save you.
Should I choose a longer or shorter loan term?
Short-term loans (36-48 months) have higher monthly payments but lower interest rates and lower total interest costs. Long-term loans (72-84 months) offer lower monthly payments but usually come with higher interest rates and significantly higher total interest costs. Most experts recommend a term of 60 months or fewer to avoid becoming "upside-down" on the loan.
Can I include sales tax in the calculator?
While this basic car loan payment calculator focuses on the purchase price, it is wise to add the estimated sales tax and registration fees to the "Vehicle Price" field if you plan to finance those costs. Alternatively, you can pay these fees out-of-pocket as part of your down payment.