Auto Loan Calculator
Calculate your monthly car payment, total interest, and see how different terms affect your loan.
Frequently Asked Questions
What is a good auto loan interest rate?
As of 2024-2025, average auto loan rates vary significantly by credit tier. For new vehicles: excellent credit (750+) qualifies for 5-7% APR; good credit (700-749) typically sees 7-9%; fair credit (650-699) faces 9-13%; below 650 may see 15%+. Used vehicle loans typically run 1-3% higher than new car rates due to higher collateral risk. Credit unions and community banks consistently offer the lowest rates — often 0.5-1.5% below dealership-arranged financing. Always get pre-approved from a credit union before visiting the dealership so you have a baseline to negotiate against. Never focus on monthly payment; focus on the total cost of the loan.
Should I choose a longer loan term?
Longer loan terms dramatically reduce monthly payments but increase total interest paid. On a $30,000 loan at 7% APR: a 36-month term costs $927/month and $3,386 total interest; a 60-month term costs $594/month and $5,640 total interest; a 72-month term costs $511/month and $6,792 total interest. The 72-month option looks attractive monthly but costs $3,406 more in interest than the 36-month option. The longer the term, the more time you also spend "underwater" (owing more than the car is worth), which is a problem if you need to sell or total the vehicle. Choose the shortest term your budget can handle. As a rule of thumb: 48 months for new cars, 36 months for used.
Deep Dive: How Auto Loan Interest Really Works
Auto loans use simple interest calculated on the remaining principal balance — the same amortization math as mortgages but typically over much shorter terms (36–72 months). The monthly payment formula is identical: M = P[r(1+r)^n]/[(1+r)^n-1]. On a $30,000 loan at 6% for 60 months, that yields a payment of $580/month and total interest of $4,799. Extending to 72 months drops the payment to $497 but increases total interest to $5,784 — paying an extra $985 for the convenience of lower monthly obligations. Longer terms almost always mean more total cost.
Dealers and lenders often quote 'money factor' for leases rather than APR, obscuring the true rate. A money factor of 0.00250 converts to an approximate APR by multiplying by 2,400, giving a 6% rate. Dealers profit significantly from financing: the 'buy rate' they receive from lenders is often 1-2% below what they quote consumers, keeping the spread as profit. This is called 'dealer reserve' and was a major target of the Consumer Financial Protection Bureau, which found it created racial disparities in lending rates.
Depreciation is the invisible cost most buyers underestimate. The average new car loses about 20% of its value in year one and 60% over five years. A $35,000 car that depreciates to $14,000 in five years has cost $21,000 in value plus $5,000+ in interest — before insurance, maintenance, or fuel. This is why used cars purchased 2-3 years old offer dramatically better value: someone else absorbed the steepest depreciation curve. The 'one-year-old used car' strategy is well-documented as one of the most cost-effective transportation approaches.
GAP insurance (Guaranteed Asset Protection) addresses the scenario where you owe more on your loan than the car is worth — a common situation in the first year of a new car loan when depreciation outpaces principal paydown. If totaled, your regular insurance pays market value; GAP covers the difference. Dealers often charge $500-$1,000 for GAP, but many lenders and insurers offer it for $30-$60/year as an add-on. The markup is significant — this is one of the most overpriced dealer F&I (finance and insurance) products, and buying it elsewhere nearly always saves money.