Debt
Auto Loan Calculator
Built and maintained by Chandranshu Kumar · Figures from the IRS, SSA, BLS and Freddie Mac
Two things to watch
Dealers love to talk in monthly payments, because a long term can make an expensive car look affordable. The catch is you pay far more interest and you can end up owing more than the car is worth, which is called being underwater. A shorter term costs more each month but saves a lot overall, and a bigger down payment does the same. This figure is the loan only. It does not include sales tax, registration or insurance, which are real costs on top.
Loan only, excludes tax, fees and insurance. Not financial advice.
How the car payment is worked out
The price minus your down payment is the amount financed. A $35,000 car with $5,000 down means borrowing $30,000. That balance, the 7% rate and the six-year term feed one amortization formula that sets a level monthly payment of about $511.
Each payment covers that month's interest first, which is the rate divided by 12 times the balance still owed, and the remainder pays down principal. Early on the balance is high, so more of the payment is interest and less reduces what you owe. As the balance drops the interest shrinks and more of each payment goes to principal.
Over the full six years the interest adds up to about $6,826, so the car costs $41,826 once the loan is paid. This figure is the loan only. Sales tax, registration and insurance are separate costs on top.
Common questions
Is a longer car loan a bad idea?
It lowers the payment but raises the interest, and it keeps you owing on a car that keeps losing value. Six years or less is a common line.
How much should I put down?
A larger down payment lowers the amount financed, which cuts both the monthly payment and the total interest, and it lowers the chance of owing more than the car is worth. Twenty percent is a common target, though any amount helps.
Does the rate depend on my credit?
Yes. Lenders price auto loans off your credit score and the loan term, so a stronger score usually earns a lower rate. Even a point or two of rate changes the interest noticeably over six years.
What is being underwater on a car?
A new car loses value fast, so early in a long loan you can owe more than it is worth, which lenders call being underwater. A bigger down payment or a shorter term shrinks that gap. The same payment math applies to any fixed loan in our loan calculator, and the full method shows the assumptions.