Key takeaways
- The amount financed equals the car's price minus your down payment and trade-in, plus any fees you roll in.
- Financing $30,000 at 6% for 72 months instead of 60 cuts the payment about $83 but adds about $1,000 in interest.
- Credit score, debt-to-income ratio, new or used status, loan term and the federal funds rate shape your rate.
- The result covers principal and interest only, leaving out insurance, fuel, maintenance and add-ons like gap coverage.
An auto loan calculator turns four numbers (the amount you borrow, the annual interest rate, the loan term and your down payment or trade-in) into a fixed monthly payment and the total interest you will pay over the life of the loan.
What goes into the calculation
Amount financed. This is the car’s price minus your down payment and trade-in value. If you still owe money on the trade-in, that balance is subtracted from its value, and any shortfall is added to the new loan. Sales tax, title and dealer fees raise the amount financed when you roll them into the loan instead of paying them upfront. How sales tax interacts with a trade-in depends on your state.
Interest rate (APR). Use the rate a lender has actually quoted you. Typical rates by credit tier for new and used cars are only a starting point, not an offer.
Loan term. This is the number of monthly payments, such as 36, 48, 60 or 72. A longer term lowers the payment but stretches the time interest accrues on the balance.
The formula
Auto loans are typically amortizing installment loans: each payment covers that month’s interest first, and the remainder reduces principal. The monthly payment is:
M = P × r(1 + r)^n ÷ [(1 + r)^n − 1]
- P = amount financed
- r = APR ÷ 12, as a decimal
- n = number of monthly payments
Total interest is the payment times the number of months, minus the amount financed: Total interest = (M × n) − P.
Hypothetical example: You finance $30,000 at 6% APR, so r = 0.005.
| Term | Monthly payment | Total paid | Total interest |
|---|---|---|---|
| 60 months | about $580 | about $34,799 | about $4,799 |
| 72 months | about $497 | about $35,798 | about $5,798 |
Stretching the term by one year cuts the payment by roughly $83 but adds about $1,000 in interest. Both rows assume the same 6% rate. In practice a longer term may also carry a higher rate, which widens the gap.
What moves the rate you’re offered
The rate you enter affects the result more than almost any other input. Lenders weigh these main factors:
- Credit score. A higher score signals lower risk and can qualify you for a lower rate, and the spread between tiers can be wide.
- Debt-to-income (DTI) ratio. A high share of income already committed to debt can mark you as a riskier borrower even with good credit.
- New vs. used. New vehicles are often financed at lower rates than used ones.
- Loan term. Shorter terms can come with lower rates because the lender carries the risk for less time.
- The federal funds rate. Auto loan rates tend to rise and fall with this benchmark rate for overnight lending between banks.
How to use the result
Run the calculator twice: once for the payment you can comfortably afford, and once for the shortest term that payment allows. Then compare total interest, not just the monthly figure. When you have quotes from a bank, a credit union and the dealer, enter each one with the same price and term so the only variable is the rate.
What the calculator leaves out
The result covers principal and interest only. It does not include:
- Auto insurance, registration renewals, fuel, maintenance or depreciation
- Taxes and fees, unless you add them to the amount financed
- Extra or early payments, which shorten the loan and cut interest if your lender applies them to principal without a prepayment penalty
- Late fees, or rate changes on the rare loans that are not fixed-rate
- Gap insurance, extended warranties or other add-ons sold with the loan
The estimate assumes a fixed rate and equal monthly payments from the first month to the last. Your loan contract’s amortization schedule is the final word on what you owe.