Auto Loan Calculator: Estimate Your Car Payment

Auto Loan Calculator

Auto Loan Amount

Interest Rate (APR)

Loan Term (Years)

Calculator Results

Monthly Payment
Total Interest Paid
Total Cost of Loan

A auto loan balance with an average interest rate of paid over a year term will have a monthly payment of . In total, the loan will cost with in interest.

How are auto loans calculated?

Auto loans are determined by several factors that impact the total cost of the loan and the monthly payment. Your loan amount is influenced by the car’s price, any down payment you make, and the trade-in value of your current vehicle. 

Your monthly payment will vary depending on the amount you borrow, the interest rate you receive, and the repayment term you choose:

1. Loan amount: This is the principal, or the amount you borrow to finance the car. The larger the loan amount, the higher the monthly payments.
2. Annual interest rate: This is the rate applied to the outstanding loan balance, and it dictates how much interest you pay over the life of the loan. Higher interest rates increase both monthly payments and the total cost of the loan.
3. Repayment term: This is the length of time you have to repay the loan. A longer term reduces your monthly payments, but you’ll pay more in interest overall. Conversely, a shorter term increases monthly payments but reduces total interest costs.

The lender uses these factors to calculate a fixed monthly payment that will repay both the principal balance and any accrued interest owed to the lender by the end of the repayment term.

Besides the loan amount, the main factors that affect our payment are the annual interest rate and the repayment term. 

How are auto loan monthly payments calculated?

Let’s say we plan to take out a $25,000 auto loan to see how this works. 

The following chart shows how our monthly payment would change if the interest rate (APR) or the repayment term differed on our $25,000 loan: 

	5% APR	7% APR	10% APR	14% APR
3-year term	$749.27	$771.93	$806.68	$854.44
5-year term	$471.78	$495.03	$531.18	$581.71
7-year term	$353.35	$377.32	$415.03	$468.50

As shown above, the monthly payment is $495.03 with a 7% interest rate and a five-year term. The payment increases or decreases as we change the interest rate or repayment term.

You’ll notice that the payment decreases with either a lower rate or a longer term. However, it’s important to remember that you’ll pay more interest over time with a longer term, even if you get a lower interest rate. 

To this point, the chart below highlights how the total interest paid increases with longer repayment terms:

	5% APR	7% APR	10% APR	14% APR
3-year term	$1,973.81	$2,789.39	$4,040.47	$5,759.87
5-year term	$3,306.85	$4,701.80	$6,870.57	$9,902.38
7-year term	$4,681.21	$6,694.63	$9,862.49	$14,354.02

While a longer loan term offers lower monthly payments, it leads to significantly higher total interest costs over the life of the loan. Balancing a lower monthly payment and minimizing the total interest charges should be a key consideration when choosing your auto loan terms.

But how are these different interest rates calculated in the first place?

How is the interest rate for an auto loan calculated?

When you get an auto loan, your interest rate reflects how risky the lender views your loan. Lenders evaluate this risk by considering factors like your credit score, job history, income, the type of car you’re buying, and the loan term. Lower-risk loans are assigned better interest rates.

The first three factors – credit score, job history, and income – relate to your creditworthiness and help the lender assess how likely you are to repay the loan. More creditworthy borrowers can secure better rates since their loans pose less risk to the lender.

The type of car affects the loan’s collateral risk. New cars often receive better rates because they hold their value longer and come with warranties that reduce the risk of costly repairs. In contrast, used cars typically have higher rates, partly due to their increased risk of breakdowns.

The loan term also influences the interest rate. Shorter terms usually have lower rates because the lender’s exposure to risk is reduced, while longer terms may lead to higher rates due to the extended repayment period.

The better your interest rate, the lower your monthly payments and total interest costs. To see how this works, let’s look again at the example we considered in the previous section:

	7% Interest Rate	14% Interest Rate
Loan Amount	$25,000	$25,000
Repayment Term	Five years	Five years
Monthly Payment	$495.03	$581.71
Total Interest Paid	$4,701.80	$9,902.38
Total Loan Cost	$29,701.80	$34,902.38

As you can see above, securing a lower interest rate of 7% could save you about $5,200 over the life of the loan compared to a 14% rate.

How is the loan term for an auto loan calculated?

When shopping for an auto loan, you must select how long you want to take to repay the loan. Longer repayment terms will result in lower monthly payments. However, you’ll pay more in total interest costs with a longer term. 

Let’s continue our example from the previous sections and assume you took out a $25,000 auto loan with a 7% interest rate. Before finalizing the loan, the lender offers three repayment terms: three years, five years, and seven years. 

Here’s how the different loan terms would impact your monthly payment and total interest costs:

Loan Term	Monthly Payment	Total Interest Paid	Total Loan Cost
3 years	$771.93	$2,789.39	$27,789.39
5 years	$495.03	$4,701.80	$29,701.80
7 years	$377.32	$6,694.63	$31,694.63

As shown above, while a seven-year loan offers the lowest monthly payment, you end up paying nearly $4,000 more in total interest compared to the three-year option. 

How is the amortization for an auto loan calculated?

An auto loan is a type of installment loan.

The goal is to fully repay the principal balance through scheduled payments over a set period. While your monthly payment remains the same, how the payment is applied to interest versus principal changes over time in a process called amortization.

In the early months, a larger portion of each payment goes toward interest, and a smaller portion is applied to the principal. As more payments are made, the interest portion decreases, and the amount applied to the principal increases.

Back to our $25,000 car loan at 7% as an example. Let’s say you chose the 5-year (60-month) repayment term in the last step. Your monthly payment will always be fixed at $495.03. But as you’ll see in the table below, you’ll start out with more of your payment going toward interest and less going toward interest as you near the end of the term.

Payment	Principal	Interest	Payment	Loan Balance
Time of Purchase				$25,000.00
Month 1	$349.20	$145.83	$495.03	$24,650.80
Month 12	$372.27	$122.76	$495.03	$20,672.55
Month 24	$399.18	$95.85	$495.03	$16,032.27
Month 36	$428.04	$66.99	$495.03	$11,056.54
Month 48	$458.98	$36.05	$495.03	$5,721.12
Month 60	$492.16	$2.87	$495.03	$0

By the last payment, nearly the entire $495.03 is applied to the principal, with only $2.87 going toward interest. 

How do taxes and fees factor into auto loan payment calculations?

Common additional costs to consider in your car purchase include state sales tax, dealership fees, and costs of services like documentation, title, registration, and delivery.

These can be paid separately upon purchase with cash or rolled into the total cost of the loan—but the latter option will increase the total amount borrowed, resulting in higher monthly payments and paying more interest over the life of the loan. 

How to calculate the ideal auto loan

You’ll be committed to these payments for three to seven years, so make sure the payments fit comfortably within your budget.

A good rule of thumb is to spend no more than 10% to 20% of your net monthly income on all automotive costs, not just the loan payment. This includes fuel, insurance, maintenance, repairs, and registration. 

The exact percentage of net income you factor in your budget will vary depending on your circumstances. Here are some situations when you might find your monthly payment toward the higher or lower end of the range: 

	Higher Monthly Costs	Lower Monthly Costs
Warranty	Used car with no warranty	New car with a warranty
Distance to work	Long commute	Short commute
Home location	Riskier area	Safer area
State tax laws	High registration costs	Low registration costs
Vehicle fuel economy	Low efficiency	High efficiency
Driving record	History of accidents or tickets	Safe driving history
Credit history	Fair-to-poor credit score	Good credit score