Auto Loan Calculator
Calculate your monthly car payment, total interest, and loan details. Perfect for planning your car purchase and comparing financing options.
How could this calculator be better?
We're always looking to improve our tools. Here are some ideas we're considering:
- Add support for different payment frequencies
- Include extra payment calculations
- Add lease vs buy comparison
- Include insurance cost estimates
- Add depreciation calculations
Email us at yoursmartcalculator@gmail.com with your suggestions!
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Quick Facts
- •The average new car loan term in the US is now over 70 months
- •A 20% down payment helps avoid being "underwater" on your loan
- •New cars lose about 20% of their value in the first year
- •Making bi-weekly payments can reduce your loan term and interest
Understanding Auto Loans
How Auto Loans Work
Auto loans are installment loans where you borrow money to purchase a vehicle and repay it over time with interest. The key components of an auto loan include the principal amount, interest rate, loan term, and any additional fees.
When you take out an auto loan:
- The lender pays the car dealer for your vehicle
- You make monthly payments to the lender
- Each payment covers both principal and interest
- Early payments are mostly interest, later payments mostly principal
- The loan is secured by the vehicle (it can be repossessed if you default)
Common Auto Loan Terms
Understanding these terms can help you get the best deal:
- APR (Annual Percentage Rate): The total cost of borrowing including interest and fees
- Loan Term: How long you have to repay (typically 24-84 months)
- Down Payment: Initial payment that reduces your loan amount
- Amortization: How payments are split between principal and interest
- Prepayment Penalty: Some lenders charge for paying off early
Frequently Asked Questions
How much car can I afford?
Financial experts recommend spending no more than 10-15% of your monthly take-home pay on car payments. Your total car expenses (including insurance, gas, and maintenance) should not exceed 20% of your monthly income.
Should I choose a longer or shorter loan term?
Shorter terms (36-48 months) mean higher payments but less interest paid overall. Longer terms (60-84 months) reduce monthly payments but increase total interest. Choose the shortest term you can comfortably afford.
How does my credit score affect my auto loan?
Your credit score significantly impacts your interest rate. Excellent credit (720+) can get rates around 3-4%, while poor credit (below 600) may see rates of 10% or higher. A 1-2% rate difference can save thousands over the loan term.
Is it better to finance through a dealer or a bank?
Get pre-approved from a bank or credit union first, then compare with dealer financing. Dealers may offer manufacturer-subsidized rates on new cars, but banks often have better rates for used cars.