Auto Loan Calculator
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Financing Tips
Auto Loan Calculator & Car Loan Calculator Guide
What is an Auto Loan Calculator?
An auto loan calculator (also known as a car loan calculator) is a financial tool that helps you estimate your monthly car payments, total interest costs, and overall loan expenses. Whether you're financing a new or used vehicle, this calculator provides accurate projections based on your loan amount, interest rate, and loan term. Use our car loan calculator to compare different financing scenarios and make informed decisions about your vehicle purchase.
Key Terms in Auto Loan Calculations
Vehicle Price
The total cost of the car before any taxes, fees, or down payment. This is the sticker price or negotiated purchase price of the vehicle.
Down Payment
The upfront cash payment you make toward the vehicle purchase. A larger down payment reduces your loan amount and monthly payments. Typically recommended to be at least 10-20% of the vehicle price.
Trade-In Value
The amount a dealer credits you for your current vehicle when purchasing a new one. This value is subtracted from the purchase price, effectively reducing your loan amount.
Sales Tax
State and local taxes applied to the vehicle purchase. Tax rates vary by location and are typically calculated as a percentage of the vehicle price (usually 5-10%).
Other Fees
Additional costs including registration, title fees, documentation fees, and dealer charges. These typically range from $500 to $2,000 depending on your location.
Interest Rate (APR)
The annual percentage rate charged on your loan. This rate depends on your credit score, loan term, and whether you're buying new or used. Lower rates mean less interest paid over time.
Loan Term
The length of time you have to repay the loan, typically expressed in months or years. Common terms range from 36 to 72 months. Longer terms mean lower monthly payments but more total interest paid.
Monthly Payment
The fixed amount you pay each month, which includes both principal (loan amount) and interest. Our car loan calculator determines this based on your total loan amount, interest rate, and term length.
Types of Auto Financing
New Car Loans
- • Lower interest rates
- • Longer loan terms available
- • Manufacturer incentives
- • Full warranty coverage
Used Car Loans
- • Higher interest rates
- • Shorter loan terms
- • Lower purchase prices
- • Limited warranty options
Additional Car Loan Terms
Loan-to-Value Ratio (LTV)
Percentage of vehicle value being financed. Calculated as (Loan Amount / Vehicle Value) × 100. Lower LTV ratios typically qualify for better interest rates.
Gap Insurance
Optional coverage that pays the difference between your loan balance and the car's actual cash value if the vehicle is totaled or stolen. Recommended for new cars with small down payments.
Principal
The actual amount borrowed after subtracting your down payment and trade-in value from the total cost. Each monthly payment reduces the principal balance.
How to Calculate Car Loan Interest
Car Loan Monthly Payment Formula:
Where:
- M = Monthly payment
- P = Principal loan amount (after down payment and trade-in)
- r = Monthly interest rate (annual APR ÷ 12 ÷ 100)
- n = Total number of monthly payments (years × 12)
Total Loan Amount (Principal): Vehicle Price + Sales Tax + Other Fees - Trade-in Value - Down Payment
Total Interest Paid: (Monthly Payment × Number of Payments) - Principal
Total Amount Paid: Monthly Payment × Number of Payments
LTV Ratio: (Loan Amount / Vehicle Price) × 100
APR Calculation: The annual percentage rate includes the interest rate plus any loan fees expressed as a yearly rate
Factors Affecting Auto Loan Rates
- Credit Score: Higher scores qualify for better rates
- Vehicle Age: Newer cars typically get better rates
- Loan Term: Shorter terms usually have lower rates
- Down Payment: Larger down payments reduce lender risk
- Income and Employment: Stable income improves terms
- Debt-to-Income Ratio: Lower ratios are preferred
Smart Auto Financing Tips
- • Get pre-approved before shopping to know your budget
- • Shop around with banks, credit unions, and dealers
- • Consider certified pre-owned vehicles for value
- • Put down at least 20% to avoid being upside-down
- • Keep loan terms under 5 years when possible
- • Factor in insurance, maintenance, and fuel costs
- • Use an auto loan calculator to compare different scenarios
Frequently Asked Questions
How to calculate car loan interest?
To calculate car loan interest, use this formula: Total Interest = (Monthly Payment × Number of Payments) - Principal Amount. First, calculate your monthly payment using the auto loan formula M = P × [r(1+r)ⁿ] / [(1+r)ⁿ-1], where P is principal, r is monthly interest rate (annual rate ÷ 12), and n is number of payments. Then multiply the monthly payment by total payments and subtract the principal to get total interest paid.
How to calculate interest on a car loan?
Interest on a car loan is calculated monthly on the remaining balance. Each monthly payment covers both principal and interest. The interest portion is calculated as: Monthly Interest = Remaining Balance × (Annual Interest Rate ÷ 12). As you make payments, the principal decreases, so the interest portion of each payment also decreases over time. Use our car loan calculator to see how interest accumulates over your loan term.
How to calculate annual percentage rate on a car loan?
The Annual Percentage Rate (APR) on a car loan includes both the interest rate and any loan fees (origination fees, documentation fees, etc.) expressed as a yearly rate. To calculate APR: APR = [(Total Interest + Fees) / Loan Amount / Loan Term in Years] × 100. For example, if you borrow $20,000 for 5 years with $2,500 in total interest and $500 in fees, the APR would be [(2,500 + 500) / 20,000 / 5] × 100 = 3%. Most lenders are required to disclose the APR before you sign.
How do you calculate interest on a car loan?
You calculate interest on a car loan by determining your monthly interest rate (annual rate ÷ 12) and multiplying it by your current loan balance. For example, with a $25,000 loan at 6% APR, your first month's interest would be $25,000 × (0.06 ÷ 12) = $125. The remaining portion of your monthly payment goes toward principal. Each month, as the principal decreases, so does the interest charge. Our auto loan calculator automates this calculation for your entire loan term.
How to calculate APR on a car loan?
To calculate APR on a car loan, you need to include both the interest charges and all loan fees. The formula is: APR = [(Total Interest + All Fees) / Principal Amount / Number of Years] × 100. Alternatively, you can use this approach: find the interest rate that makes the present value of all monthly payments equal to the loan amount minus fees. Since this calculation is complex, most car loan calculators provide the APR automatically. Always compare APR (not just interest rate) when shopping for the best car loan deal.
Auto Loan Comparison by Credit Score
| Credit Score Range | Average New Car Rate | Average Used Car Rate | Monthly Payment ($20K loan) |
|---|---|---|---|
| 781-850 (Super Prime) | 5.64% | 7.66% | $377 |
| 661-780 (Prime) | 7.01% | 9.73% | $396 |
| 601-660 (Near Prime) | 9.60% | 15.08% | $426 |
| 501-600 (Subprime) | 15.24% | 19.87% | $483 |
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