Auto Loan Calculator
Estimate your monthly car payment and total financing cost. Factor in your down payment, trade-in value, interest rate, and loan term.
How Auto Loan Financing Works
When you finance a vehicle, a lender — your bank, a credit union, or the dealer's financing arm — pays the seller and you repay the lender in monthly installments over an agreed term, with interest charged on the outstanding balance. The amount you finance is the vehicle price minus your down payment and any trade-in credit.
Auto loans are fully amortizing: each fixed monthly payment covers accrued interest plus a slice of principal, and the balance reaches zero on the final payment. Because interest accrues on the remaining balance, paying more than the minimum each month reduces total interest paid. Unlike mortgages, most auto loans do not have prepayment penalties, so early payoff is straightforward.
One critical dynamic unique to auto loans is depreciation. Cars lose value far faster than you pay down the loan — especially in the early years. A new vehicle typically loses 20%–30% of its value in the first two years, while amortization schedules are front-loaded with interest payments, meaning the loan balance drops slowly at first. This creates a period where you owe more than the car is worth, called being "underwater" or "upside-down." A down payment and a shorter loan term are the primary protections against this.
Loan Term vs. Total Cost: The Trade-Off
Longer loan terms reduce the monthly payment but increase total interest paid. This table uses a $27,000 loan at 6.5% APR to illustrate the trade-off:
| Term | Monthly Payment | Total Interest | Total Paid |
|---|---|---|---|
| 36 months | $825 | $989 | $27,989 |
| 48 months | $636 | $1,323 | $28,323 |
| 60 months | $526 | $1,667 | $28,667 |
| 72 months | $450 | $2,009 | $29,009 |
| 84 months | $393 | $2,996 | $29,996 |
The 84-month loan saves $432/month compared to the 36-month loan — but costs $2,007 more in total interest and keeps you in a depreciating asset for 7 years. The Federal Reserve's consumer credit data shows that the average auto loan term has been creeping toward 70+ months as vehicle prices have risen, a trend that significantly benefits lenders more than borrowers.
New vs. Used: How Financing Differs
New and used vehicle loans are fundamentally similar in structure, but differ in several meaningful ways:
- Interest rates are typically higher on used vehicles because older cars are harder for lenders to value and carry more risk if the borrower defaults. Used vehicle rates often run 1%–4% above new vehicle rates for the same borrower.
- Manufacturer incentives only apply to new vehicles. Automakers frequently offer subsidized financing rates (1.9%, 0%, etc.) as purchase incentives on new models. These can be extremely valuable — but they often require forgoing a cash rebate. Calculate both options to see which saves more.
- Maximum loan terms may be shorter on older used vehicles. Many lenders cap terms on vehicles that are more than 5–7 years old, since the car may be worth very little by the time an 84-month loan matures.
- Used vehicles depreciate more slowly in percentage terms, since the steepest depreciation (the first 2–3 years) has already occurred. This makes the underwater-loan risk less acute on a used purchase.
What to Negotiate: Price, Not Payment
One of the most common mistakes buyers make at dealerships is negotiating around the monthly payment rather than the purchase price. Dealers can manipulate the monthly payment by extending the loan term, adjusting the interest rate, or rolling in fees — while keeping the total purchase price (and their profit) high.
Negotiate the out-the-door vehicle price first, separately from financing. Get the price agreed upon before bringing up your trade-in or financing terms. This prevents dealers from adjusting one variable to obscure changes in another. Once the price is settled, then discuss financing — and compare the dealer's offer to your pre-approval from a bank or credit union.
The Consumer Financial Protection Bureau provides a detailed guide to understanding auto financing and your rights as a borrower, including what to watch for in loan contracts.
Frequently Asked Questions
What is a good interest rate for an auto loan?
Auto loan rates vary significantly by credit score, loan term, lender type, and whether the vehicle is new or used. As a general benchmark: borrowers with excellent credit (720+) typically qualify for rates between 4%–6% on new vehicles; those with good credit (660–719) may see 6%–9%; and borrowers with fair or poor credit often face 10%–20% or higher. Used vehicle loans typically carry rates 1%–3% higher than new car loans for the same credit profile, because used cars carry more collateral risk for lenders. Credit unions often offer rates meaningfully below dealership financing — it pays to get pre-approved from your bank or credit union before visiting a dealer.
Should I put money down on a car?
A down payment serves several purposes: it reduces the amount financed, lowers your monthly payment, reduces total interest paid, and — most importantly — helps prevent you from going underwater on the loan. Cars depreciate fast: a new vehicle typically loses 15%–25% of its value in the first year and 50%–60% within five years. If you finance 100% of a new car and it loses 20% of its value in year one, you owe significantly more than the car is worth. A 10%–20% down payment cushions against this. A common rule of thumb is the 20/4/10 guideline: 20% down, finance no more than 4 years, and keep total vehicle costs below 10% of gross monthly income.
How does trade-in value affect my loan?
Your trade-in value is credited directly against the purchase price, reducing what you need to finance. If your trade-in is worth $8,000 and you owe $5,000 on it, the $3,000 in positive equity is applied to your new loan. If you owe $10,000 on a trade-in worth $8,000 — called being underwater or upside-down — the $2,000 in negative equity is typically rolled into your new loan, increasing the amount financed. Rolling negative equity is common but financially costly; it means you are financing yesterday's depreciation along with today's purchase.
Is a longer loan term better for an auto loan?
Longer loan terms (72 or 84 months) lower your monthly payment, which is why they have become popular as vehicle prices have risen. But they cost significantly more in total interest and increase the risk of being underwater. A 7-year loan on a vehicle that depreciates quickly can leave you owing more than the car is worth for most of the loan term, which is problematic if you need to sell or the car is totaled. Most financial advisors recommend keeping auto loan terms to 48–60 months maximum. If you cannot afford the payment at 60 months, consider a less expensive vehicle rather than stretching the term.
What is the total cost of a car loan?
Total cost is monthly payment multiplied by the number of payments. A $450/month payment over 72 months means $32,400 paid total. If the amount financed was $28,000, you paid $4,400 in interest. But the true all-in cost of vehicle ownership also includes insurance, registration, fuel, maintenance, and repairs — the American Automobile Association (AAA) estimates the average annual cost of owning and operating a new vehicle at approximately $10,000–$12,000 per year when all expenses are included. This calculator covers only the loan financing cost.
Should I finance through a dealer or my own bank?
Dealers offer convenience and sometimes manufacturer-subsidized rates (such as 0% financing promotions on new vehicles), but they also earn a profit on financing — they typically mark up the rate they receive from the lender. Getting pre-approved from your bank or credit union before visiting the dealership gives you a rate benchmark and negotiating leverage. You can always take the dealer's financing if it beats your pre-approval, but you have a strong fallback. The Consumer Financial Protection Bureau recommends comparing loan offers from at least two or three sources before committing.