About Auto Loan Calculator
Calculate your car loan payments with a comprehensive breakdown of all costs including interest,
sales tax, fees, and see detailed monthly and yearly amortization schedules. Perfect for new and
used car purchases.
Auto Loan Formula
Monthly Payment = P × [r(1 + r)^n] / [(1 + r)^n - 1]
Where:
P = Loan amount (after down payment and trade-in)
r = Monthly interest rate (annual rate / 12)
n = Total number of payments (months)
Example Calculation
Vehicle Details:
Auto Price: $35,000
Down Payment: $5,000
Trade-In: $3,000
Sales Tax (7.5%): $2,625
Fees: $300
Interest Rate: 6.5% per year
Term: 60 months (5 years)
Results:
Loan Amount: $29,925
Monthly Payment: $586.57
Total Payments: $35,194.20
Total Interest: $5,269.20
Total Cost: $43,894.20
Understanding Auto Loans
Auto loans are secured loans where the vehicle serves as collateral. Most auto loans in the U.S.
have terms of 36, 60, 72, or 84 months. Longer terms mean lower monthly payments but more interest
paid over time.
Sales Tax and Trade-In
Most states allow you to deduct the trade-in value before calculating sales tax, which can save
hundreds or thousands of dollars. However, some states (California, DC, Hawaii, Kentucky, Maryland,
Michigan, Montana, and Virginia) do not offer this benefit.
Common Auto Loan Terms
| Loan Term |
Pros |
Cons |
| 36 months |
Low total interest, build equity fast |
Higher monthly payments |
| 48 months |
Good balance of payment and interest |
Moderate monthly payments |
| 60 months |
Lower monthly payments, most popular |
More interest than shorter terms |
| 72-84 months |
Lowest monthly payments |
Highest total interest, underwater risk |
Interest Rates by Credit Score
| Credit Score Range |
Typical APR (New Car) |
Typical APR (Used Car) |
| 720-850 (Excellent) |
5.0% - 6.5% |
6.5% - 8.5% |
| 690-719 (Good) |
6.5% - 8.5% |
8.5% - 11% |
| 630-689 (Fair) |
8.5% - 12% |
11% - 15% |
| 300-629 (Poor) |
12% - 18%+ |
15% - 20%+ |
Tips for Getting the Best Auto Loan
- Check Your Credit Score: Higher scores qualify for better rates
- Shop Around: Compare rates from banks, credit unions, and dealers
- Get Pre-Approved: Gives you negotiating power at the dealership
- Consider Shorter Terms: Pay less interest overall with 36-48 month loans
- Make a Larger Down Payment: 20% down reduces loan amount and may improve rate
- Watch for Manufacturer Incentives: 0% APR or cash rebates
- Read the Fine Print: Understand all fees and penalties
- Avoid Add-Ons: Extended warranties and extras increase total cost
Common Fees in Auto Loans
- Documentation Fee: $75-$500 for processing paperwork
- Title Fee: State fee to transfer vehicle title
- Registration Fee: State fee for license plates and registration
- Destination Fee: $900-$1,500 for shipping vehicle to dealer
- Dealer Prep Fee: Fee for preparing vehicle for sale
- Advertising Fee: Regional advertising cost passed to buyer
Avoiding Common Mistakes
- Don't focus only on monthly payment - consider total cost
- Avoid extending loan term just to afford a more expensive car
- Don't skip the test drive or vehicle inspection
- Beware of "yo-yo financing" where dealer recalls approved loan
- Don't trade in a car with negative equity without understanding the impact
- Avoid unnecessary add-ons like fabric protection or VIN etching
Cash Back vs. Low Interest
Dealers often offer either a cash rebate or low/0% financing. Which is better depends on several
factors including loan amount, term, and the rates you qualify for. Generally:
- Take cash back if you have excellent credit and can get low rates elsewhere
- Take low/0% financing if the rate is significantly better than alternatives
- Use our calculator to compare both scenarios
Early Payoff Considerations
Paying off your auto loan early can save on interest, but check for prepayment penalties first. Some
lenders charge fees for early payoff. If no penalty exists, consider making extra principal payments
or biweekly payments to reduce interest costs.