Auto Loan Calculator

Auto loan rates are shaped mainly by credit score, loan term, and whether the car is new or used — used-car loans typically carry a somewhat higher rate than new-car loans, partly because the vehicle itself is worth less as collateral. Shorter terms usually come with lower rates, though the trade-off is a higher monthly payment for the same amount financed.

It's common for dealerships to offer promotional financing on new vehicles, sometimes well below typical market rates. It's worth comparing that offer against a pre-approved rate from your own bank or credit union before signing, since dealer financing isn't always the cheapest option once incentives are factored in.

Stretching a car loan to 6, 7, or even 8 years lowers the monthly payment, but it also means paying interest for longer and can leave you "underwater" — owing more than the car is worth — for a larger portion of the loan, since vehicles depreciate faster than the balance typically falls in the early years. A shorter term paired with a larger down payment usually results in the lowest total cost, even though the monthly payment is higher.

• Amount financed — the vehicle price minus down payment and any trade-in value; this is what the loan actually covers.
• APR (Annual Percentage Rate) — the yearly cost of the loan expressed as a percentage, including interest.
• Term — the length of the loan, typically 3 to 8 years for auto loans.
• Negative equity ("underwater") — when the loan balance exceeds the car's current resale value.

Using the standard loan payment formula with a 5-year term at 7.5% APR:

Over 60 payments, total paid is about $33,670 — meaning roughly $5,670 goes to interest. Stretching the same loan to 7 years drops the payment to around $442/month, but total interest rises to nearly $9,100 — almost 60% more interest for a payment that's about $119 lower.

Auto loan rates aren't one-size-fits-all — lenders group borrowers into credit tiers, and the gap between tiers can be enormous. As a rough illustration of how tiers commonly spread on a 5-year new-car loan:

On a $25,000 loan over 5 years, moving from subprime (18%) to super prime (5.5%) cuts the monthly payment from roughly $635 to $478 — a difference of over $9,400 across the life of the loan. This is why checking and improving your credit score before shopping for a car loan is often the single highest-leverage step in the entire car-buying process.

The standard payment formula solves for monthly payment (M) given principal, rate, and term. The same relationship can be rearranged to solve for other unknowns:

Example: What loan amount fits a $450/month budget at 7% over 5 years?

This "solve backward" approach is exactly how the Car Affordability Calculator works — instead of starting from a price and finding the payment, it starts from a budget and finds the maximum loan.

On the same $28,000 loan at 7.5% APR, here's how total cost shifts across common terms:

Going from 3 to 7 years nearly halves the monthly payment but roughly triples the total interest paid — the fundamental trade-off behind every loan term decision.

• Focusing only on the monthly payment — a dealer can hit almost any target payment by stretching the term, hiding a much higher total cost.
• Not getting pre-approved first — walking into a dealership without a comparison rate removes your negotiating leverage on financing.
• Rolling negative equity from a trade-in into the new loan — this increases the amount financed beyond the new car's actual price.
• Skipping the total-cost comparison — always compare total interest paid across term options, not just the payment.
• Ignoring add-on products — extended warranties and gap insurance, if rolled into the loan, also accrue interest over the loan term.

• The average new-car loan term in the U.S. has crept upward over the past decade, with 72- and 84-month terms increasingly common.
• Used-car loans typically carry higher rates than new-car loans, partly reflecting the vehicle's lower collateral value.
• A larger down payment reduces both the loan amount and the risk of being underwater on the loan early on.
• Auto loan interest is not tax-deductible for personal-use vehicles, unlike mortgage interest in many cases.
• Refinancing an auto loan is possible and can lower the rate if your credit has improved since the original loan.