Auto Loan Calculator
Wondering how much your payments will be on that car you’ve been thinking about buying?
Try this auto loan calculator to see what your monthly payments will be.
How does an auto loan work?
An auto loan is an installment loan. You make payments in regular installments, for the same amount at the same time every month until the loan is paid off.
Once you pay the loan off, you receive the title to your car.
If you sell the car before you pay the loan off, you must use the proceeds of the sale to pay off your loan.
Estimate your monthly car payment with our auto loan calculator.
- Loan Amount: Put the total amount of money you’ll be borrowing here. This includes everything you’ll be financing, minus any down payment you make.
- Yearly Interest Rate (APR): Plug in your interest rate here. Try a few different rates to see how they affect your payment amount.
- Loan Term: Add the number of years you’ll take to pay your car off. You can get a lower payment with a longer loan term. Some car loan terms are as much as seven years.
Monthly Payment
Total principal paid
$0
Total interest paid
$0
Total amount paid
$0
How the interest rate, amount of loan, and loan term determine your monthly payment
The numbers you plug into the calculator find your monthly payments because of the following components:
Amount of your loan
The more money you borrow, the higher your payments will be.
You can go for a longer payoff time, shop for the lowest interest rate, find a cheaper car, or apply a down payment to your purchase to get a lower monthly loan payment.
Interest rate
Unless you choose to refinance your loan, your interest rate on your car loan will stay the same for the life of the loan. This is different from a credit card, where interest rates can and do change regularly depending on market conditions.
To save money and lower your payments, look for the lowest interest rate.
Buyers with excellent and good credit get the best interest rates on their auto loans.
Auto loan term
Terms for car loans typically go from two to five or six years, but a few lenders may offer a shorter or longer term.
Ask for a longer term if you want lower payments and more time to pay off your loan, but the longer you take to pay off your car, the more money you’ll pay in interest.
An auto-loan calculator is useful to gain insight into what your monthly car payment will really cost you
This can help you to determine the size of loan that you can realistically take on, as it gives you an approximation of how much of a payment you will be responsible for making back to your lender per month and for how many months you will be required to make. Besides budgeting, the auto-loan calculator can help you compare rates across different lenders to determine which rate works best with your finances.
How the Interest on Your Loan Is Determined
The interest rate on your loan is likely the most important factor to consider when looking at auto loan options. The interest rate on your loan stays the same throughout the lifetime of the loan unless you refinance your loan.
There are generally four factors that lenders use in determining the interest rate of your auto loan.
Your Credit History and Score
As with any type of loan or line of credit, the better your credit score, the lower the interest rate on your loan will be.
Likewise, the poorer the credit score, the higher the interest rate is likely to be.
Your credit score and your credit history indicate how likely you are to pay off your loan, especially within the requirements set by the lender like making each payment on time and for the full amount.
Your Down Payment
Putting down a large sum of money for your down payment proves lenders that you can pay your loan, making it more likely that they are willing to take you on as a buyer.
Because you have already put down a larger amount of money towards the cost of the loan, you have more to lose by not keeping up with and paying off your loan.
The Vehicle’s Age
The more information that is known about the vehicle that you are looking to purchase, the interest rate will tend to be lower.
With a brand-new car, there is no history to it, and therefore there is much less at stake.
A newer car is far less likely to have mechanical issues and you know that there are no past accidents or other incidents that can depreciate the value of the car.
The Duration of the Loan
The longer the duration of the loan is, the higher the interest rate is likely to be.
The longer the loan takes to pay off, the riskier it is to the lender.
The larger window allows for interest rates to fluctuate, which could cause a borrower to refinance.
This can also give a borrower more time to miss payments, accrue late fees, or pay the loan off in time.
Tips and Advice for Buying and Paying for a Car
Taking on a loan of any kind requires careful consideration, as it will impact your credit score and long-term financial freedom and flexibility.
Carefully weighing your auto loan options is essential to making the choice that best serves you.
You Pay More Than Just the Price of the Car
The advertised price of a car typically does not include the amount of taxes and fees that will ultimately be included in the cost of the car and what will likely be the amount that you end up having to pay off through your auto loan.
Consider paying these fees in cash so they are not tacked onto the loan, and you don’t pay interest on them.
Scrutinize the Length of the Loan
Consider how long your loan will take you to pay off.
For 72- and 84-month loans, they won’t be paid off until six and seven years, respectfully.
Consider where you see your life and finances in six to seven years and if still paying off your auto loan fits in with that.
Buying Vs. Leasing
If you don’t plan to put a lot of miles on the vehicle that you are looking to purchase, leasing could be a great alternative to buying a car with an auto loan.
If you plan to use your new vehicle as a work car, family car, or an everyday car, buying is a better option, but if you want a weekend, joyride car, leasing may make more sense.
Leasing also means that you only pay a monthly rental fee and are not responsible for an auto loan.
Consider Many Different Lenders
Exploring your leasing options will help you to seek out the most competitive rates among lenders.
Knowing the rates that are out there can also give you something to negotiate with the dealership, as you can see if they will offer you a competitive rate.
Comparing these rates will help to gain better insight into what the auto loan market looks like at your time of purchase.
Further, comparing the lending entities themselves, not just the interest rates that they offer for auto loans, can help you to choose the best loan and lender for your finances and needs.
Consider Refinancing Rather Than Trading in Your Current Car
Is your current car payment too high?
Instead of trading it in for a new car, consider refinancing.
Refinancing your auto loan means that you take out a new loan to pay off the remainder of your current loan, then you are responsible for the remainder of the second loan.
This transfers the debt of one loan to another. This may be a better option, as a new lender may offer you a lower interest rate and the lender may work better for you.
Increase Your Monthly Payment If You Can
Considering the other expenses in your life and your income, in addition to other factors that will affect how you pay your loan back can ultimately save you time and money.
If you know that you can take on a higher monthly payment, it is smart to do that.
Decreasing the loan term by increasing your monthly payment will ultimately end up costing you less, as you will have less time to accrue interest.
If your lender will let you make extra payments on your principal amount first, this means that the interest will be compounding on a lesser amount of money.
This will save you money in the long run.
Know Your Credit Score
Knowing what kind of loan you can get for your credit score is important when searching for an auto loan.
The higher your credit score, the better your interest rates are.
This can mean that you can get a better payment, but that requires you to be aware of the capability of your credit score.
Check for Hidden Fees
Check for hidden fees and caveats in your loan documents.
There could be additional fees for services that you did not ask for and do not need. Dealerships are famous for doing this.
For example, guaranteed asset protection insurance might be tacked onto the loan, which can usually be bought elsewhere for cheaper.
There may also be an early payoff penalty to discourage borrowers from paying off their loan early as you are not racking up interest.
Don’t Be Late
Make your payments on time and with the full amount due each month.
This may seem like a given, but paying your monthly bill is imperative to making your auto loan as problem free and easy as possible.
Late payments can incur late fees, can cause your pay off time to be extended, and can begin to negatively impact your credit and overall financial health.
Frequently Asked Questions (FAQs)
Auto loans may seem daunting if you’ve never had one.
They can have a largely negative impact on your credit and future financial freedom and stability if they are not properly maintained.
Having all your auto loan questions answered is essential to getting the most out of your loan and making it work for you.
The short answer is that the best lender for an auto loan is the lending service that can provide the loan that best fits your needs.
This means a lender that can offer the lowest interest rate and can offer a window of time to pay back your loan that is reasonable for your income but won’t leave you stuck paying off the loan for too long.
Financing through a dealership could include hidden fees and caveats.
Dealership loans also tend to have higher interest rates.
However, financing through a dealership is typically easier as you can walk in to test drive, be approved that day for a loan, and walk out of the dealership with the keys to your new car.
Financing through a bank or credit union requires more research and for you to seek out the loan. However, a bank may be able to offer better interest rates and may be able to work better with your specific needs.
A used car may initially appear to be the most fiscally responsible choice. Used cars tend to cost less than brand new cars. The monthly payment on a used car will almost surely be less than that of a new car.
If you are trying to have a lower down payment and initial principal payment, a used car is the better choice.
A “used” car does not necessarily mean an old car. However, this does not account for the lifetime cost of the vehicle, including maintenance and repairs.
While a new car costs more initially than a used car initially, the interest rates on auto loans for new cars tends to generally be lower. Further, the lifetime cost of new cars is likely to be less.
There is not a universal rule when it comes to down payments. Auto-loans that do not require a down payment, or a “zero down auto-loan.” You can drive a car off the lot without paying any amount of money.
It is important to consider the long-term consequences of a zero-down loan. Because you have not paid a down-payment, your principal is a higher number, and therefore your interest is compounding on a larger amount of money than if you had provided a down payment at the time of purchase.
Similarly, lenders tend to raise interest rates on zero-down loans. Zero down auto-loans could cost you more money in the long run.
If you meet the criteria and requirements of a lender, they cannot require that you take out the loan with a co-applicant.
If a lender notifies you that to qualify for their auto loan, this means that you alone do not meet the criteria for the loan.
This is likely to happen if you have a less than ideal credit score or income, or a negative credit history, as the lender wants to ensure that the loan will be paid back.
The 20/4/10 rule is a generally accurate and helpful guideline when it comes to purchasing a car and determining how much of a down payment and monthly payment you can reasonably take on.
This rule takes into consideration various aspects of your finances that impact your ability to purchase a vehicle and take on an auto loan.
Down payment, length of loan, and budget
The 20/4/10 rule states that when purchasing a car, the following should be true:
· Your down payment should be 20% of the total cost of the car
· The duration of your loan should be no longer than four years
· Your monthly “transportation” spending should be no more than 10% of your monthly income
This means that in addition to your car payment, the amount that you spend on maintenance, gasoline, electricity (if you purchase an electric vehicle), and repairs should not be more than 10% of your monthly income.
The 20/4/10 rule is sensible because it is an easy rule to stick to when car shopping.
The name is easy to remember and is easy to calculate.
While this is not the most important thing to consider when purchasing a car, it is a good place to start when beginning to shop for cars.
It is important to consider what really works best for your lifestyle, financial history and future, income, other costs, and other factors that will determine what vehicle you purchase and what auto loan you take out.
