Auto loan calculator

Work out the monthly payment and the total interest on a car loan — then price the one number the dealer won't put in front of you: what a marked-up rate actually costs.

How the math works

A car loan is a standard fixed-rate amortizing loan. The payment is the level monthly amount that clears the balance to zero over the term, with each payment split between interest on the balance and principal.

Where M is the monthly payment, P is the amount financed, i is the monthly rate (the APR divided by 12), and n is the number of months. The amount financed isn't the sticker price. It's the price plus sales tax and any fees you roll in, minus your down payment and trade-in. In most states the trade-in comes off the price before tax is applied, so a trade cuts the tax bill as well as the balance.

Total interest is just the sum of every payment minus the amount financed. Total cost adds back the cash and trade you handed over at signing — the full amount the car pulls out of your accounts.

Worked example

Take the average new-car buyer financing $32,000 at the Federal Reserve's G.19 average new-auto rate of 8.40% over 60 months, nothing down.

The payment comes to $654.99 a month. Over five years that's $39,299.27 paid in, of which $7,299.27 is interest. So the $32,000 car costs a little over $39,000 by the time the title is clear.

Put $8,000 down on the same car and the financed amount drops to $24,000, the payment falls to $491.24, and total interest drops to $5,474.45. The down payment didn't just shrink the balance — it cut the interest by a quarter, because interest is charged on what you borrow, not what you buy.

When this calculator is wrong

The payment is the easy part. Every calculator on the first page of results gets it right. Where they go quiet is on the parts that cost you the most.

• It assumes the rate you were quoted is the rate you qualified for. When a dealer arranges the financing, the lender sends the dealer a "buy rate" and lets the dealer write the contract at a higher "sell rate." The spread — the dealer reserve — is theirs to keep, and it commonly runs 1 to 2.5 percentage points. You are never shown the buy rate. On the $32,000 loan above, marking 8.40% up to 10.40% raises the payment to $686.22 and the total interest to $9,173.24 — an extra $1,873.97 over the loan for a number you can't see. The second mode above prices that spread directly. The fix is a pre-approval from your own bank or credit union: it hands you the buy rate the dealer would rather you didn't have.
• It treats a longer term as a cheaper car. Stretch the same $32,000 loan from 60 to 72 months and the payment drops to $567.33, which looks like a win. Total interest climbs to $8,848.07. You paid more to owe it longer.
• It ignores that the car is falling in value the whole time. A new car loses roughly 10% of its value the moment it leaves the lot and keeps dropping. A long loan on a fast-depreciating asset leaves you underwater — owing more than the car is worth — for years, which is a problem the day you need to sell, trade, or total it. The payment schedule and the resale value are two different curves, and this calculator only draws one of them.
• It counts the loan, not the car. Insurance, fuel, registration, tires, and maintenance are the rest of the bill, and they don't show up in a payment field. The monthly loan payment is the number the dealership optimizes; the total cost of ownership is the number that hits your account.

What to do with the result

Before you set foot on the lot, get a financing pre-approval from a bank or credit union and write the rate down. That number is your baseline. If the dealer can beat it, take the dealer's loan and enjoy the discount. If the dealer can't beat it, you already have your financing, and the F&I office loses its best lever. The pre-approval costs you a form and a soft pull; the markup it protects you from can run into four figures.

Common questions

What's a good interest rate on a car loan?

The benchmark is the Federal Reserve's G.19 average, which was 8.40% on a 60-month new-car loan at the most recent reading. Your rate moves with your credit, the term, and whether the car is new or used. The point of a pre-approval is that it tells you your rate before the dealer does.

Does a bigger down payment lower the interest rate?

Usually not the rate itself, but it lowers the interest you pay, because you're borrowing less. On the $32,000 example, moving from nothing down to $8,000 down cut total interest from $7,299.27 to $5,474.45. It also keeps you from being underwater as long, which is the quieter benefit.

Is a 72- or 84-month car loan a bad idea?

Not automatically, but the longer the term, the more interest you pay and the longer you owe more than the car is worth. A longer term is a tool for lowering the payment, not the cost. If the only way the payment fits is a seven-year loan, the more useful signal is that the car is above budget.

Should I finance through the dealer or my own bank?

Get pre-approved by your bank or credit union first, then let the dealer try to beat it. Dealer-arranged financing can be genuinely competitive, but the only way to know is to have a rate to compare it against. Without one, you can't tell a good offer from a marked-up one.

Does the calculator include sales tax and fees?

It can. Enter the sales tax rate and any fees you plan to roll into the loan, and they're added to the financed amount — with the trade-in taken off the price before tax, which is how most states handle it. Leave them at zero to see the loan on the price alone.