Calculate your monthly car loan payment and more.
Our free car loan calculator helps you estimate your monthly auto loan payment, including principal and interest, while accounting for factors like sales tax, trade-in value, and extra payments. Use this calculator to determine how much car you can afford and plan your vehicle financing budget. Whether you're buying your first car or trading up to a new vehicle, this auto loan payment calculator gives you the information you need to make informed decisions.
To get an accurate auto loan payment estimate, follow these steps:
The monthly car loan payment is calculated using this formula:
M = P[r(1+r)^n]/[(1+r)^n-1]
Where:
For a deeper understanding, Investopedia explains auto loan calculations with helpful examples.
The principal is the amount you borrow to purchase your car, and interest is what the lender charges for lending you the money. Your monthly payment goes toward both, with more going to interest at the beginning of your loan and more to principal later on. The Consumer Financial Protection Bureau provides additional guidance on understanding auto loan payments.
A down payment is the upfront amount you pay toward your car purchase. Making a larger down payment reduces your loan amount, which lowers your monthly payments and the total interest you'll pay over the life of the loan. Most lenders recommend a down payment of at least 10-20% of the vehicle price. Edmunds provides guidance on determining an appropriate down payment amount.
Vehicle sales tax varies by state and sometimes by county or city. This tax is typically added to the vehicle price before calculating your loan amount. Some states offer tax credits for trade-ins, reducing the taxable amount of your purchase. The Federation of Tax Administrators provides information on state vehicle tax rates.
These costs vary by location but typically include title transfer fees, license plate fees, registration fees, and documentation fees. These are often added to your loan amount. DMV.org offers resources on understanding these fees in your state.
Making extra payments toward your car loan principal can save you hundreds or even thousands of dollars in interest and help you pay off your loan months or years earlier. Even small additional payments can make a big difference over time. Use our calculator to see how much you could save with different extra payment scenarios. Bankrate explains strategies for paying off your auto loan early.
Dealership financing is arranged through the car dealership, which connects you with one of their lending partners. While convenient, it's important to compare these offers with other options, as they may not always offer the best rates. Some dealers offer promotional rates, including 0% financing on new vehicles for qualified buyers. The CFPB provides tips on navigating dealership financing.
Getting pre-approved for an auto loan from a bank or credit union before shopping can give you more negotiating power at the dealership. Credit unions often offer lower interest rates than traditional banks. NerdWallet compares options for bank and credit union auto loans.
Online lenders offer convenience and often competitive rates. They typically allow you to pre-qualify without a hard credit inquiry, so you can compare potential rates. Experian explains how online car loans work.
Your credit score is one of the most important factors in determining your auto loan interest rate. Generally, the higher your score, the lower your rate. According to FICO, the difference between a good and excellent credit score could save you thousands over the life of your car loan.
Longer loan terms typically come with higher interest rates. While a longer term means lower monthly payments, you'll pay more in interest over the life of the loan. Cars.com discusses the pros and cons of longer loan terms.
Interest rates for new cars are typically lower than rates for used cars. However, new cars depreciate quickly, so a slightly higher rate on a used car might still be more economical overall. Kelley Blue Book compares the financial implications of buying new versus used.
A common guideline is that your monthly car payment (including principal, interest, and insurance) should not exceed 10-15% of your gross monthly income. Your total vehicle expenses, including gas, maintenance, and insurance, should not exceed 20% of your gross income. Use our calculator to estimate affordability based on your down payment, interest rate, and other costs. NerdWallet offers a detailed affordability calculator with additional factors to consider.
Good auto loan rates vary based on market conditions, your credit score, loan term, and whether you're buying new or used. As of 2023, excellent credit borrowers might find rates below 4-5% for new cars and 5-6% for used cars, while average credit borrowers might see rates around 7-10%. Bankrate tracks average auto loan rates by credit score and loan type.
Paying off your car loan early can save you money on interest and free up monthly cash flow. However, some loans have prepayment penalties, and if you have other higher-interest debt, it might make more sense to focus on that first. Our calculator can help you see the potential savings from early payoff. Credit Karma discusses the pros and cons of early car loan payoff.
A trade-in reduces the amount you need to finance, as its value is subtracted from the price of your new vehicle. In many states, you'll also pay sales tax only on the difference between the new car price and your trade-in value, further reducing your costs. Autotrader explains how trade-ins work in the car buying process.
While you can get a car loan with almost any credit score, your rate will be significantly better with a higher score. Generally, scores above 660 will qualify for favorable rates, while scores below 600 may result in much higher rates or require a larger down payment. Some specialized lenders work with scores as low as 500, but rates may be considerably higher. Experian outlines typical credit score requirements for auto loans.
Shorter loan terms (36-48 months) typically offer lower interest rates and substantial interest savings over the life of the loan. However, the monthly payments are higher. Longer terms (60-84 months) provide lower monthly payments but cost more in total interest and may leave you "underwater" (owing more than the car is worth) for a longer period. Consider your budget, financial goals, and how long you plan to keep the vehicle when deciding. Forbes Advisor compares the pros and cons of different loan term lengths.
Captive finance companies are lending subsidiaries of auto manufacturers (like Ford Motor Credit, Toyota Financial Services, or Honda Financial Services). They often offer promotional financing rates, including 0% APR on new vehicles for well-qualified buyers, especially during model year transitions or slow sales periods. Auto Finance News explains how captive finance companies work.
Zero percent financing can be an excellent deal, as it eliminates interest costs completely. However, these offers are typically available only to buyers with excellent credit and may be limited to specific models or trim levels. Sometimes, taking a cash rebate instead of 0% financing and getting a low-rate loan elsewhere can be more cost-effective. Use our calculator to compare both scenarios. Cars.com provides a guide to evaluating 0% financing offers.
Pre-qualification is an informal estimate of how much you might be able to borrow based on self-reported information, usually without a hard credit check. Pre-approval is a more formal process where the lender verifies your financial information and credit history to provide a specific loan offer with approved terms. A pre-approval letter strengthens your position when negotiating at a dealership. Capital One explains the key differences between these two terms.