Calculate your car loan payment and total financing cost
A car loan is an amortising loan — each monthly payment covers both interest on the outstanding balance and a portion of the principal. In the early months, more of each payment goes to interest. As the balance decreases, more goes to principal.
Monthly payment = P × r / (1 − (1 + r)^−n)
Where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments.
The sticker price of a car is not what you pay when financing. Interest adds significantly to the total cost. For a $30,000 car financed over 5 years:
| Interest rate | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 3% | $539 | $2,321 | $32,321 |
| 5% | $566 | $3,968 | $33,968 |
| 8% | $608 | $6,497 | $36,497 |
| 12% | $667 | $10,019 | $40,019 |
Longer loan terms reduce the monthly payment but significantly increase total interest paid. For a $25,000 loan at 6%:
| Term | Monthly payment | Total interest |
|---|---|---|
| 3 years | $760 | $1,374 |
| 5 years | $483 | $3,998 |
| 7 years | $365 | $5,660 |
The 7-year loan saves $395 per month compared to the 3-year loan — but costs $4,286 more in total interest. The longer you finance, the more you pay for the same car.
A larger down payment reduces the amount financed, which reduces both monthly payments and total interest. A $3,000 down payment on a $25,000 car at 6% over 5 years reduces monthly payments by about $58 and saves approximately $480 in interest over the loan term.
Trade-in value works the same way — the dealer applies the trade-in value to reduce the purchase price before calculating financing.
Interest rates on used car loans are typically 1–3% higher than new car loans. Lenders charge more for used cars because they depreciate faster and have higher resale risk. A certified pre-owned vehicle from a manufacturer may qualify for near-new rates. Private party loans (buying from an individual) typically have the highest rates.
Using the amortisation formula based on loan amount, interest rate, and term. Enter your values above to see the monthly payment, total interest, and total amount paid.
As of 2024–2025, average new car loan rates range from 5–8% for buyers with good credit, and 10–15% or higher for poor credit. Credit unions often offer lower rates than dealerships. Getting pre-approved before visiting a dealership gives you negotiating leverage.
Only if cash flow is genuinely tight. A longer term increases total interest and means you may owe more than the car is worth (negative equity) for longer. If you trade in or sell before the loan ends, you could owe money even after selling.
No — only principal and interest. Registration fees, sales tax, dealer documentation fees, and insurance are not included. These can add thousands to the upfront cost.
Most car loans allow early payoff without penalty. Paying extra towards principal each month reduces the balance faster, cuts the total interest paid, and shortens the loan term. Even $50 extra per month makes a meaningful difference over a 5-year loan.