Auto Loan Calculator
Calculate your monthly car payment
How to Use This Calculator
This auto loan calculator helps you understand the true cost of financing a vehicle before you commit to a purchase. Follow these simple steps to get accurate results:
- Enter the vehicle price: Input the total purchase price of the car you are considering. This should include the sticker price plus any dealer-added accessories or packages. For a more accurate estimate, include estimated taxes and fees.
- Enter your down payment: Input the cash amount you plan to put down. A larger down payment reduces your loan amount, lowers monthly payments, and helps you avoid being underwater on your loan. Aim for at least 20% on new cars and 10% on used cars.
- Add your trade-in value: If you have a vehicle to trade, enter its estimated value. This reduces the amount you need to finance. Research your trade-in value using resources like Kelley Blue Book or Edmunds before visiting a dealer.
- Enter the interest rate: Input the annual percentage rate (APR) you expect to receive. Get pre-approved from your bank or credit union before shopping to know your actual rate. If estimating, use current average rates for your credit score range.
- Select your loan term: Choose from 24 to 84 months. Shorter terms mean higher monthly payments but lower total interest. Longer terms offer lower payments but cost significantly more over the life of the loan.
Common mistakes to avoid: Not factoring in taxes and fees, overestimating your trade-in value, choosing too long a loan term just for lower payments, and not getting pre-approved before shopping. Always verify numbers with your lender before signing.
Understanding Auto Loans
An auto loan is a secured loan where the vehicle serves as collateral. Because lenders can repossess the car if you default, auto loan rates are typically lower than unsecured personal loans. However, rates vary significantly based on several key factors that every car buyer should understand.
New vs. Used Car Rates
New car loans typically offer interest rates 1-3% lower than used car loans. This is because new vehicles hold their value better in the early years and represent lower risk for lenders. As of 2024, average new car rates range from 5-7% for buyers with good credit, while used car rates typically run 7-10%. Certified pre-owned vehicles often qualify for rates between new and used.
Loan Terms and Their Impact
Auto loan terms range from 24 to 84 months. While longer terms offer attractive lower monthly payments, they come with significant drawbacks. A 72-month loan at 7% costs thousands more in interest than a 48-month loan at the same rate. Longer terms also increase the time you spend underwater on your loan, where you owe more than the car is worth. Financial experts recommend limiting auto loans to 48-60 months to minimize interest costs and depreciation risk.
The Importance of Down Payments
Your down payment directly impacts your loan amount, monthly payment, and total interest paid. A 20% down payment on a new car creates immediate equity and typically keeps you from going underwater. Smaller down payments mean financing more of a depreciating asset, which increases risk if you need to sell or if the car is totaled. If you cannot afford 20% down, consider a less expensive vehicle or wait until you have saved more.
Trade-In Considerations
Trading in your current vehicle reduces the amount you need to finance. However, negotiation strategy matters. Always negotiate the trade-in value separately from the new car price. Research your trade-in value beforehand using Kelley Blue Book, Edmunds, or CarGurus. Some dealers inflate trade-in offers while adding to the purchase price, creating the illusion of a better deal. If you owe money on your trade-in, that balance gets added to your new loan.
Dealer vs. Bank Financing
You have two main financing options: dealer financing and direct lending through banks or credit unions. Getting pre-approved from your bank before visiting a dealer gives you negotiating leverage and a baseline rate to compare. Dealers earn commissions from lenders for originating loans, which can result in marked-up rates. However, manufacturers sometimes offer promotional 0% or low-rate financing that beats any bank rate. Always compare both options and read the fine print carefully.
Frequently Asked Questions
What is considered a good auto loan rate?
A good auto loan rate depends on your credit score and whether the vehicle is new or used. For new cars, excellent credit (750+) typically qualifies for rates of 4-5% or lower. Good credit (700-749) usually gets rates around 5-7%. For used cars, add 1-2% to these ranges. Rates above 10% are considered high and may indicate you should improve your credit before buying or consider a less expensive vehicle. Always shop multiple lenders to find the best rate available to you.
How does my credit score affect my auto loan rate?
Your credit score is the primary factor determining your interest rate. Borrowers with scores of 750+ typically receive the best rates, often 3-4% lower than borrowers with scores in the 600s. A difference of 4% on a $30,000, 60-month loan means paying over $3,500 more in interest. Before buying, check your credit score and reports for errors. If your score is below 680, consider waiting and improving your credit to save thousands over the loan term.
Should I finance a new or used car?
The decision depends on your budget, priorities, and how long you plan to keep the vehicle. New cars offer lower interest rates, full warranties, and the latest features, but depreciate 20% in the first year. Used cars cost less upfront, have already taken the biggest depreciation hit, and have lower insurance costs. A 2-3 year old certified pre-owned vehicle often represents the best value, combining lower prices with remaining warranty coverage and lower-than-average used car rates.
What loan term should I choose?
Choose the shortest term you can comfortably afford. A 48-60 month term balances reasonable monthly payments with manageable total interest costs. Avoid 72-84 month loans unless absolutely necessary, as they significantly increase total interest paid and extend the period you are underwater on the loan. If you need a longer term to afford the payment, the vehicle is likely too expensive. A good rule: if you cannot afford the payment on a 60-month loan, consider a less expensive car.
Do I need gap insurance?
Gap insurance covers the difference between what you owe and what your car is worth if it is totaled or stolen. You need gap insurance if you put less than 20% down, have a loan term longer than 60 months, are rolling over negative equity from a previous loan, or drive more than average miles. Gap coverage typically costs $20-40 per year through your auto insurer, which is much cheaper than dealer-offered gap insurance at $500-700. If you have significant equity in your vehicle, gap insurance is unnecessary.
Can I refinance my auto loan later?
Yes, refinancing your auto loan can lower your interest rate and monthly payment if your credit has improved since the original loan, if market rates have dropped, or if you originally accepted a high dealer rate. Most lenders require the vehicle to be less than 7-10 years old with under 100,000 miles. Refinancing typically involves a small fee and a hard credit inquiry. Calculate whether the interest savings outweigh any fees before refinancing, especially if you are more than halfway through your loan term.
How much should I put down on a car?
The ideal down payment is 20% for new cars and 10% for used cars. This amount typically keeps you from going underwater on your loan, where you owe more than the car is worth. A larger down payment reduces your monthly payment, decreases total interest paid, and may qualify you for a better interest rate. If you have a trade-in, its value counts toward your down payment. Avoid zero-down offers unless you have excellent credit and a specific short-term reason for preserving cash.
Is dealer financing or bank financing better?
Neither is universally better, so compare both. Banks and credit unions often offer lower rates, especially for used cars, and the pre-approval process strengthens your negotiating position. Dealers may offer manufacturer-subsidized promotional rates (0% or 1.9%) that beat any bank, but these usually require excellent credit and may not be combinable with other incentives. The key is getting pre-approved before visiting the dealer so you have a baseline rate. Never accept the first dealer rate offered without negotiating.
Auto Loan Examples
Example 1: New Car Purchase ($35,000)
Sarah is buying a new SUV priced at $35,000. She has excellent credit (760 score) and qualifies for 5.5% APR. With a $7,000 down payment (20%), she finances $28,000. Choosing a 60-month term, her monthly payment is $534. Over the loan term, she pays $4,040 in interest, making her total cost $39,040. If she chose a 72-month term instead, her payment drops to $461 but total interest increases to $5,192, costing her an extra $1,152.
Example 2: Used Car Purchase ($18,000)
Mike is buying a 3-year-old sedan priced at $18,000. His credit score of 690 qualifies for 7.5% APR on used vehicles. He puts $3,600 down (20%) and has a trade-in worth $2,000, financing $12,400. With a 48-month term, his monthly payment is $300. Total interest paid is $2,000, making his total financing cost $14,400. By choosing the shorter term and solid down payment, Mike stays ahead of depreciation throughout the loan.
Example 3: Refinancing an Existing Loan
Jennifer financed her car two years ago at 9% APR when her credit was fair. She still owes $15,000 with 36 months remaining, making payments of $477. After improving her credit to 720, she refinances at 5.5% for the remaining 36 months. Her new payment is $453, saving $24 monthly. Over the remaining term, she saves $864 in interest. Even with a $100 refinancing fee, she comes out $764 ahead.
Tips for Getting a Better Auto Loan
Follow these expert-recommended strategies to secure the best possible auto loan terms:
- Get pre-approved before shopping: Apply with your bank, credit union, and online lenders before visiting dealerships. Pre-approval gives you a firm rate to compare against dealer offers and strengthens your negotiating position. According to the Consumer Financial Protection Bureau, pre-approved buyers save an average of $1,000 or more compared to those who accept dealer financing without shopping around.
- Negotiate the vehicle price first: Always negotiate the purchase price before discussing financing. Dealers may try to focus on monthly payments, which can obscure a higher price or longer term. Get agreement on the out-the-door price, then negotiate financing separately. The FTC recommends keeping these negotiations distinct to avoid confusion.
- Calculate the total cost, not just monthly payment: A lower monthly payment achieved through a longer term often means paying thousands more in total. Use this calculator to compare the total cost of different term lengths before deciding. A payment that seems $50 higher per month may save you $2,000 overall.
- Check your credit reports first: Review your credit reports from all three bureaus for errors before applying. Disputing and correcting errors can improve your score and qualify you for better rates. You can access free reports at AnnualCreditReport.com.
- Time your purchase strategically: End of month, end of quarter, and end of year are often the best times to buy when dealers are motivated to meet sales quotas. Holiday weekends also frequently feature manufacturer incentives and promotional financing rates.
Sources: Consumer Financial Protection Bureau (CFPB) Auto Loan Shopping Guide, Federal Trade Commission (FTC) Consumer Information on Auto Financing.
The Auto Loan Payment Formula
This calculator uses the standard amortization formula to calculate monthly payments:
Where:
M = Monthly payment
P = Principal (vehicle price - down payment - trade-in)
r = Monthly interest rate (annual rate / 12)
n = Total number of payments (loan term in months)
For example, a $28,000 loan at 6.5% APR for 60 months:
- P = $28,000
- r = 0.065 / 12 = 0.00542
- n = 60
- M = $28,000 x [0.00542(1.00542)^60] / [(1.00542)^60 - 1] = $548
Did you know?
- The average new car loan in the United States is over $40,000 with a monthly payment of $730.
- New cars lose approximately 20% of their value in the first year alone due to depreciation.
- Getting pre-approved for an auto loan before shopping can save you $1,000 or more compared to dealer financing.
- The average loan term has increased from 48 months in 2000 to over 70 months today.
- Buyers with excellent credit (750+) pay about 3% less in interest rates than buyers with fair credit (650).