Auto Loan Calculator
Estimate your monthly car payment including taxes, trade-in value, and down payment.
The Formula
P = financed amount (price − down − trade-in + tax)
r = monthly rate · n = payments
P = $25,000 · r = 0.005
= 25,000 × [0.005 × (1.005)⁶⁰] / [(1.005)⁶⁰ − 1]
= $483 / month
How Car Loans Work
An auto loan is a secured loan where the vehicle serves as collateral. The lender provides the purchase price minus your down payment and trade-in, and you repay it in fixed monthly installments over the loan term, plus interest.
Factors That Affect Your Car Payment
Your monthly payment depends on the vehicle price, down payment, trade-in value, interest rate (APR), and loan term. Sales tax is also added to the financed amount in most states.
Frequently Asked Questions
What is a good APR for a car loan?
It depends on whether you're buying new or used and your credit score. For new cars with excellent credit, rates under 5–6% are competitive. For used cars, under 8–9% is solid. If you're being quoted above 15%, it's worth checking if you can improve your credit before buying, or consider a less expensive car to reduce the loan amount.
Should I choose a longer or shorter loan term?
Longer terms (72–84 months) lower your monthly payment but cost more in interest and increase the risk of going underwater on the loan — meaning you owe more than the car is worth. Shorter terms (36–48 months) save money overall but require higher payments. Most financial experts recommend not going beyond 60 months for a new car or 48 months for a used car.
Is it better to put more money down on a car?
Generally yes. A larger down payment reduces the loan amount, lowers your monthly payment, reduces total interest paid, and helps you avoid being underwater on the loan. Aim for at least 10–20% down on a new car. If you're trading in a vehicle, that equity counts toward your down payment.
Should I finance through the dealer or my own bank?
Always get pre-approved through your bank or credit union before visiting the dealership. This gives you a baseline rate to compare against dealer financing. Dealers sometimes offer special manufacturer rates (like 0% APR promotions) that beat bank rates — but they may also mark up the rate to make a profit. Pre-approval puts you in control of the negotiation.
What is GAP insurance and do I need it?
GAP (Guaranteed Asset Protection) insurance covers the difference between what you owe on the loan and what your car is worth if it's totaled or stolen. If you made a small down payment or have a long loan term, you're at risk of being underwater on the loan — especially in the first year or two. GAP insurance is usually inexpensive ($200–$400) and worth considering in those cases. Buy it from your insurance company, not the dealer — dealership GAP coverage is typically much more expensive.
Can I pay off my car loan early?
Most auto loans allow early payoff without penalty, and doing so saves you interest. If your loan has a prepayment penalty, it's listed in your loan agreement. Even making one extra payment per year can reduce your payoff time and save hundreds in interest. Before paying extra, verify with your lender that the extra payment goes toward principal, not future payments.