How your car payment is calculated
The amount you finance is the vehicle price plus sales tax and fees, minus your down payment and trade-in equity. If you still owe more on your trade-in than it is worth (negative equity), the difference is added to the new loan. The monthly payment uses the standard loan formula on that amount at your APR.
Sales tax rules differ by state. Many states tax only the price after the trade-in credit, which this calculator assumes. Check your state rules.
Is a longer car loan a good idea?
Stretching a loan to 72 or 84 months lowers the monthly payment but raises total interest, and lenders often charge higher rates on longer terms. Cars lose value quickly, so a long loan can leave you "upside down", owing more than the car is worth. The comparison table shows how much more each extra year really costs.
The 20/4/10 rule
A popular guideline for buying a car: put 20% down, finance for no more than 4 years, and keep total car costs (payment, insurance, fuel) under 10% of your gross monthly income.
How to get a lower auto loan rate
- Get pre-approved by a bank or credit union before you visit the dealer.
- Compare the dealer's financing offer against your pre-approval.
- Choose a shorter term, which usually comes with a lower APR.
- Improve your credit score or add a co-signer with strong credit.
Frequently asked questions
What is a good APR for a car loan?
It depends on your credit score, whether the car is new or used, and the term. Borrowers with excellent credit get the lowest rates, while subprime borrowers can pay several times more. Compare offers from banks, credit unions and the dealer.
Should I take 0% financing or a cash rebate?
Run both. Use 0% APR with the full price, then use your best outside rate with the rebate subtracted from the price. Pick whichever has the lower total cost.
Can I pay off my car loan early?
Most auto loans use simple interest and allow early payoff without penalty, which reduces total interest. Check your contract for prepayment terms.
Does the payment include insurance?
No. Car insurance is paid separately. Get quotes before you buy, because insurance can vary a lot by model.
Estimates only. Your rate, taxes and fees depend on your lender, state and credit.