Auto Loan Calculator
Real Numbers. Before You Sign.
Work out what a car actually costs before you sign. Enter vehicle price, down payment, trade-in value, APR, and loan term. The calculator breaks down monthly payment, total interest, and how one more thousand dollars down changes the math.
Amount financed
$31,720
incl. $1,920 tax + $800 fees
Monthly payment
$635.60
Total paid
$38,136
Total interest
$6,416
over 60 months
Upside-down window on this loan
You start with positive equity on day one. Down payment + fees were enough that the car is worth more than you owe from month 1.Depreciation curve: −22% year 1, −15% year 2, −10%/yr thereafter (floor 20% of MSRP).
What another $1,000 down would do
Same APR, same term, but with $4,000 down instead:
- Monthly payment $615.57 ($20.04 less per month)
- Total interest $6,214 ($202 saved over the life of the loan)
APR vs interest rate
Dealers quote interest rate; banks quote APR. APR folds in loan origination fees, prepaid interest, and mandatory add-ons, so it’s the honest apples-to-apples number. If a dealer says "5.9% interest," ask for the APR disclosure — it’s federally required.
The 20/4/10 rule (a reasonable ceiling)
Personal-finance consensus: put 20% down, finance for no more than 4 years, and keep total transportation cost (payment + insurance + fuel + maintenance) under 10% of gross monthly income. This keeps you out of underwater-loan territory when the car depreciates.
First-month breakdown at your current settings: $198.25 goes to interest, $437.35 to principal. The principal share grows each month as the loan amortizes.
Planning to keep the car past payoff? The Maintenance Schedule will show you what to budget for post-loan years. Thinking about fuel cost at different MPGs? See the Gas Cost Calculator.
How auto loans really work
An auto loan is a contract between you and a lender with three variables: principal (amount financed), APR (annual percentage rate, which includes fees), and term (number of months). The monthly payment is derived from those three using a standard amortization formula. In the first month of the loan, almost all of your payment goes to interest because the principal balance is at its peak. Each month, as principal shrinks, the interest portion shrinks too and the principal portion grows. By the final months of the loan, almost your entire payment is principal. This is why a longer loan can look attractive on the monthly payment but costs far more total.
APR is the number that actually matters. The "interest rate" quoted by a dealer on the F&I office computer is often just the note rate, excluding origination fees, mandatory add-ons, and prepaid interest. APR is legally required disclosure that rolls all of that into a single annualized cost of credit number. If two offers have different APRs they are not economically equivalent even if the interest rate looks the same — the higher-APR loan costs more. Federal law (Truth in Lending Act) requires the APR disclosure on every consumer loan contract, and you should read it before signing.
Term length is the lever that creates the most buyer damage. A 72- or 84-month loan reduces monthly payment but stretches interest accrual far past the vehicle\'s useful depreciation curve. On a typical new car, depreciation in year one is 20 to 25%. If you financed 100% of the purchase price on 84 months, you will owe more than the car is worth for roughly three years. During that period you cannot trade without rolling negative equity into the next loan. The clean math is: shorter term = more interest saved, less negative equity risk, faster path to ownership. The 20/4/10 rule (20% down, 4-year max term, total transportation cost under 10% of gross income) exists because it keeps buyers out of that trap.
Frequently asked questions
Is auto loan interest simple or compound?
Auto loans use simple interest calculated daily on the remaining principal. That means paying extra toward principal reduces interest owed immediately. Compound interest (where interest accrues on previously accrued interest) is rare on auto loans but common on credit cards. Check your loan contract — the word "simple" should appear.
Is dealer financing worse than a credit union?
Often. Dealers mark up the buy rate from the lender by 1 to 2 percentage points as dealer reserve — that is dealer profit, not your cost of capital. A credit union will usually quote the true rate with no markup. Get pre-approved at a credit union first, then let the dealer beat it if they can.
Do I need gap insurance on a new car?
Gap insurance covers the difference between loan balance and insurance payout if the car is totaled. If you put down less than 20% or financed over 60 months, yes — depreciation puts you upside down fast. If you put 20%+ down and financed 48 months or less, probably not worth it.
What does "upside down" on a loan mean?
You owe more than the car is worth. On a 72- or 84-month loan with minimal down payment, most buyers are upside down for the first 2 to 3 years because cars depreciate 20 to 25% in year one. Trading in while upside down rolls the negative equity into the next loan, compounding the problem.
Are there penalties for paying off early?
Federal law bans prepayment penalties on most auto loans, but a few lenders still charge them on older contracts. Check your loan agreement for "prepayment penalty" or "minimum interest." Usually you can pay the full balance any time; the only cost is the accrued simple interest through the payoff date.
How does trade-in equity work?
If your trade-in is worth more than you owe, the difference is positive equity and reduces the amount financed on the new car. If you owe more than the trade is worth, that negative equity is added to the new loan — you are financing part of the old car plus all of the new one. Paying off the old loan first avoids this trap.
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