Auto Loan Calculator

How This Calculation Works

The loan amount is determined by subtracting your down payment and trade-in value from the vehicle price. Your monthly payment is then calculated using the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n – 1], where P is the loan principal, r is the monthly interest rate, and n is the number of monthly payments. Total interest is the difference between all payments made and the original loan amount.

Auto Loan Rates by Credit Tier: New vs Used

Interest rates on auto loans vary dramatically based on credit tier, and the gap between new and used financing has widened in recent years as used-car risk premiums have grown. Borrowers with superprime credit (781+) typically see new-car rates in the 4-6% range for 2026, while used-car rates for the same tier run about 1-2 points higher because lenders price in faster depreciation and higher default risk on older vehicles. As credit scores drop, the spread widens further — subprime borrowers (below 600) can see new-car rates climb into the 12-15% range and used-car rates push past 18-20% at some lenders.

Because the difference between tiers can be worth thousands of dollars in interest, it's worth spending a few months improving your credit score before a major purchase if you have the flexibility to wait. Paying down revolving balances and correcting errors on your credit report are the fastest levers most buyers can pull.

Choosing a Loan Term: 36 to 84 Months

Loan term length has a bigger impact on total interest than most buyers expect. Stretching a loan from 48 to 72 or 84 months lowers the monthly payment, but the extra months of interest accrual can add thousands to the total cost — and longer terms also increase the risk of being underwater (owing more than the car is worth) for years, since vehicles depreciate faster than long loans amortize.

*Based on a $30,000 loan at 6% APR. Notice that going from 36 to 84 months nearly halves the payment but roughly triples the interest paid. A good rule of thumb: choose the shortest term whose payment still fits comfortably in your budget, rather than stretching purely to hit a lower monthly number.

Down Payments and the 20/4/10 Rule

A widely cited budgeting guideline for car purchases is the "20/4/10 rule": put down at least 20% of the purchase price, finance for no longer than 4 years (48 months), and keep total vehicle costs — including your payment, insurance, and fuel — under 10% of your gross monthly income. Following all three components simultaneously helps prevent the common trap of buying more car than your budget can absorb.

• 20% down reduces your loan-to-value ratio and helps you avoid negative equity in the first year of ownership.
• A 48-month cap keeps total interest reasonable while still delivering a manageable payment for most buyers.
• The 10% income cap forces a realistic look at what you can actually afford once insurance and gas are included, not just the loan payment alone.

Negative Equity and Rolling In a Trade-In

If you still owe more on your current car than a dealer will offer for it, you have negative equity — sometimes called being "upside down." Many dealers will offer to roll that shortfall into your new loan, but doing so increases the amount financed on the new vehicle, which raises both your payment and the interest you'll pay over the life of the loan. It can also compound the problem: the new car starts depreciating immediately while you're financing an inflated balance, making it more likely you'll be upside down again at your next trade-in.

If rolling in negative equity is unavoidable, consider a shorter loan term to pay down the extra balance faster, and check whether gap insurance makes sense given your larger loan-to-value ratio.

Dealer Financing vs Credit Union Preapproval

Walking into a dealership with financing already lined up changes the entire negotiation dynamic. A preapproval from a bank or credit union gives you a real, comparable interest rate and turns the conversation from "what's my payment?" to "can you beat this rate, and what's the out-the-door price?" Credit unions in particular are known for competitive auto rates because they're member-owned and often carry lower overhead than large banks.

Dealer-arranged financing isn't automatically worse — manufacturers sometimes subsidize rates as low as 0-3% on certain new models to move inventory, and those promotional rates can beat any outside lender. The safest approach is to shop both: get a preapproval as your baseline, then let the dealer try to beat it before signing anything.

Sales Tax and Registration Fees by State

Sales tax on vehicle purchases varies enormously by state and can add thousands of dollars to your total cost — a factor many buyers forget to budget for. A few examples on a $35,000 vehicle:

Registration and title fees add another $50-$700 depending on the state and vehicle weight, and some states also charge annual personal property taxes on vehicles. Always confirm your state and county's exact rate before finalizing a purchase — trading in a vehicle can also reduce the taxable amount in many states, since tax is applied to the price after trade-in credit.

Leasing vs Buying

Leasing typically offers a lower monthly payment because you're only financing the vehicle's projected depreciation over the lease term, plus a rent charge, rather than its full value. That makes leasing attractive for drivers who want a new car every 2-3 years and stay within mileage limits. Buying, whether with cash or a loan, means higher payments up front but ownership at the end — no mileage caps, no wear-and-tear charges, and the ability to keep driving payment-free once the loan is paid off.

Over a 10-year ownership horizon, buying is almost always cheaper than repeated leasing, since lease payments never stop while loan payments eventually end. Leasing makes more financial sense for drivers who value predictability and always want the newest safety and technology features.

Total Cost of Ownership: Beyond the Loan Payment

The loan payment is only part of what a car actually costs. A realistic budget should also include insurance (often $1,200-$2,400 per year depending on the vehicle and driving record), fuel or electricity, routine maintenance, and depreciation. For a typical new sedan, total monthly cost of ownership — payment plus insurance, fuel, and maintenance — often runs 40-60% higher than the loan payment alone.

• Insurance: varies widely by state, age, and vehicle type; sports cars and trucks generally cost more to insure.
• Fuel: a vehicle averaging 25 mpg driven 12,000 miles a year at $3.30/gallon costs roughly $1,580 annually.
• Maintenance: budget $600-$1,200 per year for a newer vehicle, more as the car ages past 60,000 miles.

Refinancing an Auto Loan

Refinancing replaces your current auto loan with a new one, ideally at a lower rate or better terms. It's most beneficial in the first two to three years of a loan, when the balance is still high enough to make a rate reduction meaningful and before depreciation causes the car's value to fall below the loan balance. Common reasons to refinance include an improved credit score since the original loan, falling market rates, or a desire to remove a co-signer.

Before refinancing, check for prepayment penalties on your existing loan, compare total interest (not just the monthly payment) on the new loan, and be cautious about extending the term simply to lower the payment, since that can increase total interest paid even at a lower rate.

Frequently Asked Questions

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