Paying off your car loan early can be a smart financial move, saving you money on interest and freeing up cash flow sooner. This calculator helps you estimate the potential benefits of making extra payments towards your car loan. By understanding the impact of accelerating your payments, you can make informed decisions about your finances.
How the Calculator Works:
The calculator compares two scenarios:
Scheduled Payments: The total interest paid and time to repay the loan if you only make the minimum required monthly payments.
Early Payoff: The total interest paid and time to repay the loan if you consistently add an extra amount to your monthly payment.
The Math Behind the Savings:
At its core, this calculator utilizes a standard loan amortization formula to project future payments. Here's a simplified breakdown:
Monthly Interest Rate: Calculated by dividing the Annual Interest Rate by 12.
Total Interest Paid (Scheduled): This is calculated by first determining the standard monthly payment using the loan amortization formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly Payment
P = Principal Loan Amount (Current Loan Balance)
i = Monthly Interest Rate
n = Total Number of Payments (Remaining Months)
Then, the total amount paid over the life of the loan is M * n. The total interest is (M * n) – P.
Early Payoff Calculation: When an Extra Payment Amount is added to the standard monthly payment, the total monthly payment increases. This increased payment is applied first to the accrued interest for that month, and the remainder reduces the principal balance more rapidly. The calculator iteratively calculates the new payoff period and the total interest saved by consistently applying the larger payment.
Key Inputs:
Current Loan Balance: The principal amount you still owe on your car loan.
Annual Interest Rate (%): The yearly interest rate applied to your loan, expressed as a percentage.
Remaining Months on Loan: The original number of months left until your loan is fully paid off if you stick to the original payment schedule.
Monthly Extra Payment Amount: The additional amount you plan to pay each month beyond your scheduled minimum payment.
Interpreting the Results:
The calculator will show you:
Total Interest Saved: The difference in interest paid between the scheduled payoff and the early payoff scenario.
New Payoff Time: The number of months it will take to pay off the loan with the extra payments. This is often significantly shorter than the original term.
When to Consider Early Payoff:
High Interest Rates: If your car loan has a relatively high interest rate, paying it off early yields greater savings.
Financial Windfalls: Receiving a bonus, tax refund, or inheritance can be used to make a significant dent in your loan principal.
Debt Reduction Goals: If you're focused on becoming debt-free, aggressively paying off your car loan can accelerate this goal.
Cash Flow Improvement: Eliminating a monthly car payment sooner frees up your budget for other financial priorities like saving, investing, or paying down other debts.
Disclaimer: This calculator provides an estimation based on the inputs provided. Actual savings may vary due to factors such as changes in payment amounts, payment timing, and specific loan terms. Always consult your loan agreement for precise details.
function calculateEarlyPayoff() {
var currentBalance = parseFloat(document.getElementById('currentBalance').value);
var annualInterestRate = parseFloat(document.getElementById('annualInterestRate').value);
var remainingMonths = parseFloat(document.getElementById('remainingMonths').value);
var extraPayment = parseFloat(document.getElementById('extraPayment').value);
var resultDiv = document.getElementById('result');
resultDiv.innerHTML = "; // Clear previous results
// Input validation
if (isNaN(currentBalance) || currentBalance <= 0 ||
isNaN(annualInterestRate) || annualInterestRate < 0 ||
isNaN(remainingMonths) || remainingMonths <= 0 ||
isNaN(extraPayment) || extraPayment 0) {
scheduledMonthlyPayment = currentBalance * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, remainingMonths)) / (Math.pow(1 + monthlyInterestRate, remainingMonths) – 1);
} else {
scheduledMonthlyPayment = currentBalance / remainingMonths;
}
// Calculate total interest for scheduled payments
var totalScheduledPayments = scheduledMonthlyPayment * remainingMonths;
var totalScheduledInterest = totalScheduledPayments – currentBalance;
// Calculate early payoff
var currentBalanceForEarlyPayoff = currentBalance;
var totalPaidEarlyPayoff = 0;
var monthsToPayoffEarly = 0;
var totalInterestEarlyPayoff = 0;
var monthlyPaymentEarly = scheduledMonthlyPayment + extraPayment;
// Handle case where the extra payment alone might not be enough to cover interest in the first month
// Or if the calculated scheduled payment is already very small.
if (monthlyPaymentEarly 0) {
var interestThisMonth = currentBalanceForEarlyPayoff * monthlyInterestRate;
var principalThisMonth = monthlyPaymentEarly – interestThisMonth;
// Ensure principal reduction doesn't exceed remaining balance
if (principalThisMonth > currentBalanceForEarlyPayoff) {
principalThisMonth = currentBalanceForEarlyPayoff;
monthlyPaymentEarly = interestThisMonth + principalThisMonth; // Adjust final payment
}
currentBalanceForEarlyPayoff -= principalThisMonth;
totalPaidEarlyPayoff += monthlyPaymentEarly;
monthsToPayoffEarly++;
if (monthsToPayoffEarly > remainingMonths * 2) { // Safety break to prevent infinite loops if inputs are extreme
resultDiv.innerHTML = 'Calculation error or inputs too large. Please check your values.';
return;
}
}
totalInterestEarlyPayoff = totalPaidEarlyPayoff – currentBalance;
var interestSaved = totalScheduledInterest – totalInterestEarlyPayoff;
if (interestSaved < 0) {
interestSaved = 0; // If somehow no savings or negative savings, show 0
}
// Format results for display
var formattedInterestSaved = interestSaved.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedNewPayoffTime = monthsToPayoffEarly === 1 ? '1 month' : `${monthsToPayoffEarly} months`;
var formattedTotalScheduledInterest = totalScheduledInterest.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedTotalInterestEarlyPayoff = totalInterestEarlyPayoff.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedScheduledPayoffTime = remainingMonths === 1 ? '1 month' : `${remainingMonths} months`;
resultDiv.innerHTML = `
Estimated Savings
${formattedInterestSaved} Total interest saved
${formattedNewPayoffTime} New payoff time
vs.
${formattedTotalScheduledInterest} Total interest (scheduled)
${formattedScheduledPayoffTime} Scheduled payoff time
`;
}