Car Loan Calculator

A car loan is a secured installment loan you take from a bank, credit union, or dealership financing arm to purchase a vehicle. The vehicle itself serves as collateral for the loan. You borrow the purchase amount minus your down payment, then repay it over a fixed term — typically 36 to 84 months — with interest.

APR (Annual Percentage Rate) is the true cost of borrowing expressed as a yearly rate. It differs from a simple interest rate because it may include certain fees. When comparing loan offers from different lenders, always compare APRs rather than just the stated interest rate. Even a difference of 0.5% in APR can translate to hundreds of dollars in extra interest over the life of a 60-month loan on a $30,000 vehicle.

A longer loan term lowers your monthly payment but dramatically increases the total interest you pay. For example, a $25,000 loan at 6.5% APR costs about $488/month over 60 months ($4,300 total interest), but only $385/month over 84 months ($7,340 total interest). The 84-month loan saves $103/month but costs $3,040 more in interest. Understanding this trade-off is essential before signing any financing agreement.

1. Enter the vehicle price (the negotiated out-the-door price before tax).
2. Add your down payment and any trade-in value.
3. Enter your state's sales tax rate (typically 0–10%).
4. Input the APR offered by your lender and select your preferred loan term.
5. Review the estimated monthly payment and total interest in the results section.
6. Use the Loan Term Comparison table to see how payments and interest change across different term lengths at your APR.
7. Click "Show Schedule" to see the full amortization table month by month.

Get pre-approved for a loan from your bank or credit union before visiting a dealership. Pre-approval gives you negotiating leverage and helps you avoid dealer financing markups, which are common. Dealers often receive a commission for arranging financing at a higher rate than what the lender actually requires.

Keep your loan-to-value ratio (LTV) below 100% — meaning do not borrow more than the car is worth. Financing beyond 100% of the vehicle's value puts you "underwater" from day one. If the car is totaled or stolen, your insurance payout may not cover your outstanding loan balance. Gap insurance can protect you in this scenario but adds to your overall cost.

The 20/4/10 rule is a widely cited guideline: put at least 20% down, finance for no more than 4 years, and keep total car costs (payment plus insurance) under 10% of your gross monthly income. Following this rule helps prevent overextending yourself on transportation costs and keeps you building equity rather than staying perpetually underwater on your loan.