Are you shopping for a new or used car? Use our car loan calculator to see what your monthly payment might look like and how much interest you’d pay over the life of the loan.

Key points to remember

- Many car buyers take out a loan to finance their purchase, either from the dealership or through a bank.
- Loan repayments will be based primarily on the price of the car, whether new or used, the down payment, the term of the loan, and your credit score.
- Use the auto loan calculator before you head to the parking lot so you’re ready to find a car that fits your budget and negotiate the best deal.

## Auto Loan Payment Calculator Results Explained

To use the auto loan calculator, enter a few loan details, including:

**Vehicle cost:**The amount you want to borrow to buy the car. If you plan to pay a deposit or trade-in, subtract that amount from the price of the car to determine the loan amount.**Term:**The time you have to repay the loan. In general, the longer the term, the lower your monthly payment, but the higher the total interest paid will be. On the other hand, the shorter the term, the higher your monthly payment and the lower the total interest paid will be.**New/Used:**Whether the car you want to buy is new or used. If you don’t know the interest rate, this can help determine the rate you’ll get (interest rates tend to be higher for used cars).**Interest rate:**The cost of borrowing money, expressed as a percentage of the loan.

Once you’ve entered the details, the auto loan repayment calculator automatically displays the results, including dollar amounts for the following:

**Total monthly payment:**The amount you will pay each month for the duration of the loan. A portion of each monthly payment is used to repay the principal and a portion applies to interest.**Total capital paid:**The total amount of money you will borrow to buy the car.**Total interest paid:**The total amount of interest you will have paid during the term of the loan. In general, the longer you delay repaying the loan, the more interest you pay overall. Add up the total principal paid and the total interest paid to see the total overall cost of the car.

Use the auto loan calculator *before* you head to the parking lot so you’re ready to find a car that fits your budget and negotiate the best deal.

## How is interest calculated on a car loan?

An auto loan calculator shows the total amount of interest you will pay over the term of a loan. If the calculator offers an amortization table, you can see how much interest you will pay each month. With most car loans, part of each payment is allocated to principal (the amount you borrow) and part to interest.

The interest you pay each month is based on the current loan balance. So, at the beginning of the loan, when the balance is higher, you pay more interest. As you pay off the balance, the interest portion of monthly payments decreases.

You can use the auto loan calculator to figure out how much interest you owe, or you can do it yourself if you’re up for a little math. Here is the standard formula for calculating the monthly interest on your car loan by hand:

$$

Monthly interest

=

(

interest rate

12

)

×

loan balance

text{Monthly interest}=bigg(frac{text{interest rate}}{12}bigg)timestext{loan balance}

Monthly interest=(12interest rate)×loan balance

Here is an example, based on a balance of $30,000 with an interest rate of 6%:

$$

=

(

0.06

12

)

×

$

30

,

000

=

0.005

×

$

30

,

000

Monthly interest

=

$

150

begin{collected}=bigg(frac{0.06}{12}bigg)times$30,000=0.005times$30,000text{Monthly interest}=$150end{collected}

=(120.06)×$30,000=0.005×$30,000Monthly interest=$150

To convert a percentage to a decimal number, divide the percentage by 100 and remove the percent sign. For example, 6% becomes the decimal 0.06 (6 ÷ 100 = 0.06).

## What is a good APR for a car loan?

Interest on a car loan can significantly increase the total cost of the car. For example, interest on a $30,000 loan for 36 months at 6% is $2,856. The same loan ($30,000 at 6%) paid off over 72 months would cost $5,797 in interest.

Of course, even small changes in your rate impact the total amount of interest you pay overall. The total amount of interest on a $30,000 loan for 72 months at 5% is $4,787, a savings of over $1,000 compared to the same loan at 6%.

It is therefore advantageous to shop around to find the best possible rate. Although interest rates vary by lender, your rate also depends on other factors, including:

**Federal Reserve interest rate:**When the Fed keeps interest rates low, you pay less to borrow money.**Your credit score:**In general, the better your credit, the lower your interest rate will be.**Your debt ratio (DTI):**Your DTI shows how much of your gross monthly income is used to pay your monthly debts. The lower your DTI, the lower your interest rate will be.**Type of loan:**Used car loans have higher rates than new car loans (because used cars have a lower resale value).**The term of the loan:**Longer loan terms usually have higher interest rates.

So what is a good APR for a car loan? The best way to answer this question is to look at averages. Here are the average new and used car loan rates by credit score, according to Experian’s Q2 2021 Auto Finance Market Report:

Average New and Used Car Loan Rates by Credit Score | ||
---|---|---|

Credit score level | Credit score range | Average price of new cars |

deep subprime | 300 – 500 | 14.59% |

Subprime | 501 – 600 | 11.03% |

not first | 601 – 660 | 6.61% |

Prime | 661 – 780 | 3.48% |

Super Premier | 781 – 850 | 2.34% |

In general, a “good” rate is one that’s at or, ideally, below your average credit score. Here’s a look at what those averages would cost over the life of a five-year, $30,000 loan:

How much do $30,000 5 year loans cost | |
---|---|

Credit score range | Total interest |

300 – 500 | $12,435.47 |

501 – 600 | $9,163.30 |

601 – 660 | $5,311.88 |

661 – 780 | $2,729.02 |

781 – 850 | $1,818.42 |

## How do I calculate my car payment?

Our loan calculator shows how much a loan will cost you each month and how much interest you’ll pay overall. It can be helpful to use the calculator to try out different scenarios to find a loan that fits your monthly budget and the total amount of interest you’re willing to pay.

The best way to get a lower auto loan interest rate is to improve your credit score. If you have a low credit score, consider delaying buying a car (if possible) until you can improve your score.

To manually calculate your monthly car loan payment, divide the total loan amount and interest by the loan term (the number of months you have to pay off the loan). For example, the total interest on a $30,000 loan over 60 months at 4% would be $3,150. So your monthly payment would be $552.50 ($30,000 + $3,150 ÷ 60 = $552.50).

If you took a three-month payment freeze on a loan due to financial hardship related to COVID-19, your subsequent repayments may be slightly higher to compensate.

The longer you take to pay off a loan, the more interest you’ll pay overall, and you’ll likely have a higher interest rate as well. Make a down payment, if possible, and aim for the shortest possible loan term with a monthly payment you can still afford. And keep in mind that a car comes with expenses beyond paying off the loan. Make sure you have money left over to pay for car insurance, gas, parking, maintenance, etc.

## Is a 72 month car loan a good idea?

Car loans often have variable interest rates, so in a rising rate environment, a shorter loan might be a better idea. While you may have slightly lower monthly payments than a 60-month loan, you’ll also end up paying more interest over the life of the loan. Since cars depreciate over time, a longer loan can also lead to you becoming “upside down”, where your car is worth less than the outstanding loan balance.

## Can we negotiate the APR for a car loan?

This will depend on who the lender is and your creditworthiness. Auto dealerships that issue auto loans may have more leeway to work with the interest rate to close the deal. Plus, lenders aren’t usually required to offer you their best available interest rate, so negotiating could save you hundreds or thousands of dollars over the life of the loan.

## Why do dealers often want you to finance?

Car dealerships make money by loaning buyers cash, which is one of the reasons they want you to finance your car instead of paying cash. This can take the form of interest paid on the loan as well as commissions or origination fees.