Understanding the math behind your auto loan is essential before stepping onto a dealership lot. This car loan interest calculator helps you break down the financial impact of your vehicle purchase by considering the vehicle price, your down payment, trade-in value, and local sales tax.
Most auto loans use a simple interest formula, but the payments are amortized. This means that while your monthly payment stays the same, the portion of the payment going toward interest decreases over time as the principal balance drops.
Key Factors That Affect Your Car Loan
Credit Score: This is the primary factor lenders use to determine your APR (Annual Percentage Rate). Higher scores generally qualify for lower rates.
Loan Term: While longer terms (like 72 or 84 months) lower your monthly payment, they significantly increase the total interest you pay over the life of the loan.
Down Payment: Putting more money down reduces the amount you need to borrow, which lowers both your monthly payment and your total interest costs.
Vehicle Age: New cars typically have lower interest rates compared to used cars because they are easier for lenders to value and resell if necessary.
Realistic Example: New SUV Purchase
Imagine you are buying a new SUV for $40,000. You have a $5,000 down payment and a trade-in worth $3,000. Your local sales tax is 6%.
Base Loan Amount: $40,000 – $5,000 – $3,000 = $32,000
Plus Tax (6% of $40k): $2,400
Total Loan Principal: $34,400
Interest Rate: 5% APR
Term: 60 Months
Result: Monthly payment of $649.17 and total interest of $4,550.20.
Strategies to Lower Your Monthly Payment
If the calculated payment is higher than your budget allows, consider these options:
Increase your down payment: Every $1,000 extra down reduces your monthly payment by roughly $15-$20.
Shop for rates: Check with credit unions or online lenders before going to the dealer; they often offer more competitive APRs.
Refinance later: If your credit score improves after a year of timely payments, you may be able to refinance the remaining balance at a lower rate.
function calculateAutoLoan() {
var price = parseFloat(document.getElementById("carPrice").value) || 0;
var down = parseFloat(document.getElementById("downPayment").value) || 0;
var trade = parseFloat(document.getElementById("tradeIn").value) || 0;
var taxPercent = parseFloat(document.getElementById("salesTax").value) || 0;
var annualRate = parseFloat(document.getElementById("interestRate").value) || 0;
var months = parseInt(document.getElementById("loanTerm").value) || 12;
// Calculate Sales Tax on the vehicle price
var taxAmount = price * (taxPercent / 100);
// Principal = (Price – Down – Trade) + Tax
var principal = (price – down – trade) + taxAmount;
if (principal 0) {
var monthlyRate = (annualRate / 100) / 12;
// Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
var x = Math.pow(1 + monthlyRate, months);
monthlyPayment = (principal * x * monthlyRate) / (x – 1);
totalCost = monthlyPayment * months;
totalInterest = totalCost – principal;
} else {
// 0% Interest case
monthlyPayment = principal / months;
totalInterest = 0;
totalCost = principal;
}
// Format results
document.getElementById("monthlyPayment").innerText = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("totalPrincipal").innerText = "$" + principal.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("totalInterest").innerText = "$" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("totalCost").innerText = "$" + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results
document.getElementById("results").style.display = "block";
}