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 would pay over the life of the loan.
Key Takeaways
- Many car buyers take out a loan to finance their purchase from the dealer or through a bank.
- Auto loan payments are based primarily on the price of the car, whether it is new or used, the down payment, the length of the loan, and your credit score.
- Use the auto loan interest calculator before you head to the car lot so you'll be ready to find a car that fits your budget and negotiate the best deal.
Auto Loan Payment Calculator Results Explained
To use the car loan interest calculator, enter a few details about the loan, including:
- Vehicle Cost: The amount you want to borrow to buy the car. If you plan to make a down payment or trade-in, subtract that amount from the car's price to determine the loan amount.
- Term: The amount of time you have to repay the loan. 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 to borrow the money, expressed as a percentage of the loan.
After you enter the details, the auto loan payment and interest calculator automatically displays the results,including the dollar amounts for the following:
- Total Monthly Payment: The amount you'll pay each month for the duration of the loan. Some of each monthly payment goes toward paying down the principal, and part applies to interest.
- Total Principal Paid: The total amount of money borrowed to buy the car.
- Total Interest Paid: The total amount of interest paid over the life of the loan. The longer you take to repay the loan, the more interest you generally pay overall. Add together the total principal paid and total interest paid to see the total overall cost of the car.
See our picks for the best auto loans in a variety of categories:
- Best Auto Loan Rates
- Best Used Car Loans
- Best Auto Refinance Loans
- Best Car Loans for Bad Credit
- Best Car Loans for Fair Credit
- Best Car Loans for First Time Buyers
How Is Interest Calculated on a Car Loan?
An auto loan interest calculator shows the total amount of interest you can expect to pay over the life of a loan. If the calculator offers an amortization schedule, you can see how much interest you'll pay each month. With most car loans, part of each payment goes toward the principal (the amount you borrow), and part goes toward interest.
The interest you pay each month is based on the loan's then-current balance. So, in the early days of the loan, when the balance is higher, you pay more interest. As you pay down the balance over time, the interest portion of the monthly payments gets smaller.
You can use the car loan calculator to determine how much interest you owe, or you can do it yourself if you're up for a little math. Here's the standard formula to calculate your monthly car loan interest by hand:
Monthlyinterest=(12interestrate)×loanbalance
Here's an example, based on a $30,000 balance with a 6% interest rate:
=(120.06)×$30,000=0.005×$30,000Monthlyinterest=$150To convert a percent to a decimal, divide the percent 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 an auto loan can significantly increase the total cost of the car. For example, the interest on a $30,000, 36-month loan at 6% is $2,856. The same loan ($30,000 at 6%) paid back over 72 months would cost $5,797 in interest.
Even small changes in your rate can impact how much total interest amount you pay overall. The total interest amount on a $30,000, 72-month loan at 5% is $4,787—a savings of more than $1,000 versus the same loan at 6%.
So it pays to shop around to find the best rate possible. While interest rates vary by lender, your rate depends on other factors, too, including:
Federal Reserve Rates When the Fed keeps interest rates low, you pay less to borrow money. Your Credit Score Credit scores and rates typically have inverse relationships. So a higher credit score earns you a lower rate and vice versa. Your Debt-to-Income (DTI) Ratio This highlights how much of your gross monthly income goes toward paying your monthly debts. A lower DTI usually earns you a lower rate and vice versa. Loan Type Used car loans have higher rates than those for new cars. That's because used cars have a lower resale value. Loan Term Longer loan terms generally have higher rates. Use the auto loan calculator before you head to the car lot so you'll be ready to find a car that fits your budget and negotiate the best deal.
So what's a good APR for a car loan? The best way to answer that is to look at averages. Here are the average new and used car loan rates by credit score, according to Experian:
Average New Car Loan Rates by Credit Score Credit Score Tier Credit Score Range Average New Car Rate Deep Subprime 300 - 500 14.08% Subprime 501 - 600 11.53% Near Prime 601 - 660 8.86% Prime 661 - 780 6.40% Super Prime 781 - 850 5.18% A good rate is generally equal to or, ideally, less than the average for your credit score. Here's a look at what those averages would cost over the life of a five-year, $30,000 loan:
See AlsoHow Much Car Can You Really Afford? | The Motley FoolThe Rule of 72 (or How To Easily Double Your Debt)How Much Should My Car Payment Be? - NerdWalletShould you get an 84-month auto loan?
What $30,000 Loans Cost Over 5 Years Credit Score Range Total Interest 300 - 500 $11,957.54 501 - 600 $9,613.81 601 - 660 $7,242.85 661 - 780 $5,134.82 781 - 850 $4,116.86 How Can I Calculate My Car Payment?
Our loan calculator shows how much a loan will cost you each month and how much interest you will 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 amount of total 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 holding off on a car purchase (if possible) until you can improve your score.
To calculate your monthly car loan payment by hand, divide the total loan and interest amount by the loan term (the number of months you have to repay the loan). For example, the total interest on a $30,000, 60-month loan at 4% would be $3,150. So, your monthly payment would be $552.50 ($30,000 + $3,150 ÷ 60 = $552.50).
The longer you take to repay 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 loan term possible with a monthly payment you can still afford. And keep in mind that a car comes with expenses beyond the loan payment. Be sure you'll have money left over to pay for car insurance, gas, parking, maintenance, and the like.
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 could be a better idea. While you may have slightly lower monthly payments than a 60-month loan, you will also end up paying more interest over the life of the loan. Because cars depreciate with time, a longer loan can also lead you to become "upside-down," where your car is worth less than the outstanding balance on the loan.
Can You Negotiate the APR for a Car Loan?
This will depend on who the lender is and how creditworthy you are. Car dealers that originate auto loans may have more leeway to work with the interest rate to get the deal done. Lenders are not usually required to offer you their best interest rate available, 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 dealers make money from lending money to buyers, which is one reason they are interested in having you finance your car instead of paying cash. This can come in the form of interest paid on the loan as well as commissions or origination fees.
The Bottom Line
You can use an auto loan interest calculator to help you better understand how much you will pay in monthly payments in total interest for various interest rates on a certain size loans. These tools can also help you compare interest rates on the same loan, so you can clearly understand what you can save with a lower interest rate.
Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy.
Experian. "What Auto Loan Rate Can You Qualify for Based on Your Credit Score?"
Consumer Financial Protection Board. "Can I Negotiate the Interest Rate on an Auto Loan with the Dealer?"
Wall Street Journal. "Car Dealerships Don’t Want Your Cash—They Want to Give You a Loan."
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