Auto loan calculator

Use this auto loan calculator to estimate your monthly car payments based on loan amount, interest rate, term length, and down payment or trade-in value. It helps you understand the total cost of financing your vehicle and compare different loan options with ease.

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What is an auto loan?

An auto loan is a financial agreement in which a lender provides the borrower with funds to purchase a vehicle. In return, the borrower agrees to repay the loan over time, usually in equal monthly installments. The vehicle typically serves as collateral, which means if the borrower defaults, the lender can repossess the car to recover their losses.

Auto loans are one of the most common types of consumer loans, especially in countries where car ownership is essential for mobility. These loans can be obtained from banks, credit unions, online lenders, or directly from dealerships offering in-house financing.

Key terms in auto loans

1. Loan amount

This is the total amount of money you borrow to purchase the car. It may include not just the vehicle’s price, but also:

• Sales tax
• Licensing and registration fees
• Optional add-ons (warranty, insurance)
• Minus any down payment or trade-in value

Example: If a car costs $30,000 and you make a $5,000 down payment and trade in a vehicle worth $3,000, the loan amount would be $22,000.

2. Interest rate (APR)

The annual percentage rate (APR) is the yearly cost of borrowing expressed as a percentage. It includes the base interest rate and any fees charged by the lender. A lower APR means a cheaper loan.

Factors that influence your APR:

• Credit score
• Loan term
• Vehicle age
• Income and debt level
• Lender’s policy

Tip: Even a 1–2% difference in APR can save you hundreds or even thousands over the life of the loan.

3. Loan term (Length)

This is the period over which you agree to repay the loan. Common terms include:

• 36 months (3 years)
• 48 months (4 years)
• 60 months (5 years)
• 72–84 months (6–7 years)

Longer terms reduce your monthly payment, but you’ll pay more in total interest. Shorter terms increase monthly payments but reduce interest cost and help you build equity in the car faster.

Example: A $20,000 loan at 6% over 36 months = ~$608/month. Over 72 months = ~$332/month, but more than $2,000 extra in total interest.

4. Down payment

A down payment is the upfront amount you pay in cash when purchasing a vehicle. A higher down payment reduces your loan amount and monthly payments, and shows the lender that you’re financially responsible.

Benefits of a larger down payment:

• Lower interest rates (better loan terms)
• Avoiding or reducing negative equity (owing more than the car is worth)
• Possibly avoiding GAP insurance requirements

Typical recommendation: 10–20% of the car’s purchase price.

5. Monthly payment

This is the fixed amount you agree to pay each month. It includes both:

• Principal (the amount borrowed)
• Interest (the cost of borrowing)

Your monthly payment is influenced by the loan amount, APR, term, and any additional fees or costs rolled into the loan.

Tip: Use your auto loan calculator above to see how different loan terms and rates affect your monthly payments.

Trade-ins and their impact on loans

What is a trade-in?

A trade-in is your current vehicle that you offer to the dealership as part of the transaction when buying a new or used car. The dealer assesses your car’s value and applies that amount as a credit toward the purchase price of your new vehicle.

Benefits of a trade-in:

• Reduces the total amount financed
• Lowers your monthly payment
• Can potentially reduce sales tax liability (in some regions, sales tax is applied only to the price difference)

Example: You’re buying a car for $25,000. Your trade-in is valued at $5,000. You’ll only need to finance $20,000 (minus any down payment), reducing both your loan size and total interest paid.

Be cautious with negative equity:

If you owe more on your current car loan than the car’s trade-in value (i.e., negative equity), the dealer may roll the remaining balance into your new loan—meaning you’re borrowing more than the car is worth. This is a risky practice and should be avoided if possible.

Factors that affect auto loan interest rates

Here’s how lenders determine your rate—and how you can improve your chances of securing a low one:

1. Credit score

Your credit score is a major factor. Higher scores (720+) usually get the best rates. Lower scores may still qualify for financing but with higher interest.

2. Vehicle age

New cars often qualify for lower interest rates than used cars, since they’re considered less risky collateral. Some lenders charge higher APRs for older vehicles or those with high mileage.

3. Loan term

Longer loans (60–84 months) usually come with higher interest rates. Lenders charge more because the risk of default increases over time and the car depreciates faster.

4. Down payment and loan-to-value ratio (LTV)

A bigger down payment reduces the lender’s risk and may qualify you for a better rate. LTV is calculated as the loan amount divided by the vehicle value. The lower the ratio, the better your rate.

Tips for getting the best auto loan deal

Check your credit in advance

Obtain a free credit report and improve your score before applying. Paying down existing debt and correcting errors can make a big difference.

Get pre-approved

Get loan offers from banks, credit unions, or online lenders before visiting a dealership. This gives you bargaining power and protects you from high dealer markup rates.

Compare multiple offers

Don’t settle for the first rate you’re offered. Compare terms across different lenders and negotiate the best deal.

Consider shorter loan terms

Shorter loans may seem costly month-to-month, but they save you a lot in interest and help you build equity faster.

Watch for fees and add-ons

Dealers may add GAP insurance, warranties, and other extras to your loan. These increase the total loan amount and interest paid. Ask for a detailed breakdown.

Total cost of car ownership

Financing your car is just one part of the overall cost. Don’t forget to factor in:

• Insurance premiums
• Fuel expenses
• Maintenance and repairs
• Property taxes or registration fees
• Depreciation (resale value)

Should you finance or pay cash?

Financing pros:

• Preserve cash for emergencies or investments
• May qualify for low-interest promotional deals (e.g., 0% APR)
• Opportunity to build or improve credit score

Financing cons:

• You pay interest over time
• Higher risk of negative equity
• Monthly financial obligation for several years

Tip: If you can earn more through investing your cash than your loan’s interest rate, financing may make financial sense.