Auto Loan Calculator: Estimate Your Car Payment
Shopping around for the right auto loan can help you find the best terms — but before you start applying, you need to use an auto loan calculator to understand how much your car payment will be and what interest you’ll pay over the life of your loan.
Why Using a Car Loan Calculator Is Important
Buying a car can be an expensive endeavor, and most people can’t afford to pay cash outright. Luckily, consumers who need cars can obtain auto loans through car dealerships, banks, credit unions, and even online lenders.
Auto loans are secured personal loans, with the car acting as collateral. This means if you fail to make payments, your lender can repossess the vehicle and sell it to make its money back. Because the loans are secured, the interest rate is often lower than what you’d find with other types of consumer debt, such as credit cards and personal loans.
Your interest rate will be affected by various factors, however, such as whether you’re buying a new or used car; if you have a trade-in; the amount of your down payment; your credit score and income; and the length of your repayment loan term. Comparison shopping among lenders is also important for finding the best deal — and an auto loan calculator can help by estimating your monthly payments and total costs of borrowing.
How to Find a Good Auto Lender
As you can see from the car loan calculator, the interest rate you pay plays a huge role in both your monthly payments and overall loan costs. That’s why it’s so important to find the best auto loan available.
To find a good car loan, you shouldn’t wait until you get to the dealership and just accept whatever financing it offers. Instead, you should get quotes on your own from multiple lenders before you head there so you’ll know what you can afford — and what interest rates you really qualify for. This is also an opportunity to negotiate with the dealer for better terms on its own loan. If they’re unable to beat a competing offer, you can choose to go with a different lender.
Working on improving your credit score by paying down debt and making on-time payments can also help you to get the best possible auto loan rates. You should look for car loan lenders that can prequalify you without a hard credit inquiry, which can temporarily affect your credit score. Fortunately, many lenders realize this and allow you to check your rates and eligibility with a soft credit pull only.
Frequently Asked Questions
Here are answers to a few frequently asked questions about auto loans.
How much will my car payment be?
Monthly payments on car loans are based on multiple factors, so it can be difficult to estimate what you’ll pay each month until you know the price of the car you want to buy and your specific loan terms. However, by entering some basic information into the auto loan calculator above, you can get a pretty good idea of what might end up paying.
How does interest work on a car loan?
Interest on a car loan generally accrues every day based on the principal balance or amount you borrow. As you make loan payments, part of your payment amount goes toward principal and part of it goes toward paying accrued interest.
The higher your interest rate, obviously, the more total interest you’ll pay — but the length of your loan also affects your car loan payment. If you choose a loan with a longer repayment term, you’ll have lower monthly payments because of the longer repayment timeline. If you opt for a loan with a shorter term, your monthly payments will be higher, but you’ll pay less interest over the life of your loan.
Say, for example, you borrow $20,000 (roughly the price of an average used vehicle) using a loan with a 5% interest rate and 48-month loan term. In that scenario, your monthly payments will be around $461. But if you take 60 months to repay your loan with the same interest rate, your monthly payment will be just $377 at the same interest rate for the same vehicle.
How does my credit score affect my auto loan?
Your credit score is a major factor in calculating your auto loan rate. A higher credit score means you present lower risk as a borrower and are more likely to be approved for a loan with a low interest rate. If your score is on the lower end, you’ll be assigned a higher rate or could even be denied for a car loan.
If your credit score improves, it may be possible for you to refinance your auto loan with a lower rate. Depending on where you’re at in your repayment term, this could save you money as you pay your remaining loan balance. You’ll likely get better terms when it’s time to buy your next car, too.
Can I get an auto loan with bad credit?
Bad credit auto loans are very common. In fact, there are lenders that specifically cater to borrowers with poor credit. Creditors can give bad credit auto loans to consumers with lower risk than bad credit personal loans because the car could just be repossessed if the borrower doesn’t pay.
Unfortunately, many auto loan lenders charge unreasonably high interest rates and tack on additional fees for bad credit loans. Make sure the interest rate on your loan is fair and that the monthly payments are affordable — or you risk losing the vehicle and further damaging your credit.
An auto loan calculator can help you get a good idea of what your monthly car payment might be like based on the purchase price of the car you’re eyeing and total loan amount (which might be reduced if you’re bringing trade-in value to the table). By using an auto loan payment calculator before you head to the dealer, you’ll be in a stronger position to negotiate and walk away with a loan that works for you.