Question 1

How do I calculate my monthly car payment

Accepted Answer

Use the formula: PMT = P × [r(1+r)^n] / [(1+r)^n - 1], where P is the loan amount, r is the monthly interest rate (APR ÷ 12), and n is the number of months. For example, $25,000 at 6% (0.5% monthly) for 60 months equals approximately $483/month.

Question 2

What is a good interest rate for an auto loan

Accepted Answer

For excellent credit (720+), 3-5% APR on new cars and 4-6% on used cars is good. For good credit (690-719), expect 4-6% on new and 5-7% on used. Rates vary by lender, term length, and whether the car is new or used.

Question 3

How much should my down payment be

Accepted Answer

Aim for at least 10-20% down payment. 20% down ($6,000 on $30,000 car) helps you avoid being underwater (owing more than car worth), may qualify you for better rates, and significantly reduces interest costs.

Question 4

Should I choose a longer loan term for lower payments

Accepted Answer

Longer terms (72-84 months) have lower payments but cost much more in interest. Consider 60 months or less when possible. Only choose longer term if necessary for budget and plan to keep car long-term to avoid being underwater.

Question 5

How does my credit score affect my car loan rate

Accepted Answer

Higher credit scores qualify for lower rates. Excellent credit (720+) might get 3-5% APR, while fair credit (630-689) might pay 6-10% APR, and poor credit (below 630) could pay 10-18%+. On a $30,000 loan, the difference is hundreds per month.

Question 6

Should I get pre-approved for an auto loan

Accepted Answer

Yes, get pre-approved before car shopping. Pre-approval tells you exactly what you can afford, helps negotiate better, streamlines the dealership process, and lets you compare dealer financing to your pre-approval offer.

Question 7

What's the difference between buying and leasing a car

Accepted Answer

Buying means you own the car after payments end and can keep it or sell it. Leasing means you rent the car for 3 years, then return it or buy it. Leasing typically has lower payments but you build no equity. Lease if you want new cars every few years; buy if you want long-term ownership.

Question 8

Can I pay off my auto loan early

Accepted Answer

Yes, most auto loans allow early payoff without prepayment penalties. Paying extra toward principal reduces interest and shortens the loan term. Even small extra payments ($50-$100/month) can save thousands in interest.

Question 9

How do trade-ins work when financing

Accepted Answer

Your trade-in's net value (market value minus loan payoff) reduces your new loan amount. If you owe $8,000 and it's worth $10,000, you have $2,000 in equity to use as down payment. If you owe more than it's worth (negative equity), that amount is added to your new loan.

Question 10

What fees should I expect with an auto loan

Accepted Answer

Common fees include destination fee ($800-$1,500), documentation fee ($100-$500), title and registration ($120-$450), and possibly dealer fees. Some are negotiable, others (like destination fee) are not. Always ask for a complete breakdown of fees.

Question 11

Should I take dealer financing or get my own loan

Accepted Answer

Compare dealer financing to pre-approval from your bank or credit union. Dealers often have relationships with multiple lenders and can sometimes beat bank rates, but they may also mark up the rate for profit. Never accept dealer financing without comparing to your pre-approval.

Question 12

How can I lower my monthly car payment

Accepted Answer

Lower your payment by: extending the loan term (but pays more interest), making larger down payment, buying a less expensive car, improving your credit score for lower rate, or negotiating a lower purchase price. Balance affordable payment with reasonable total cost.

Practice Examples

Question 13

Example 1: Calculate Payment

Accepted Answer

Problem:

Vehicle Price: $28,000
Down Payment: $4,000
Trade-In: $0
Interest Rate: 7%
Term: 60 months
Tax: 8%
Fees: $400

Solution:

Tax: $28,000 × 0.08 = $2,240
Loan Amount: $28,000 + $2,240 + $400 - $4,000 = $26,640
Monthly Rate: 0.07 ÷ 12 = 0.00583
Payments: 60

PMT = 26,640 × [0.00583(1.00583)^60] / [(1.00583)^60 - 1]
PMT = $527/month

Total Paid: $31,620
Interest: $4,980

Question 14

Example 2: Compare Terms

Accepted Answer

Problem:

Loan Amount: $25,000
Rate: 6%
Compare 48 vs. 60 vs. 72 months

Solution:

48 months: $587/month, $3,176 interest
60 months: $483/month, $3,980 interest
72 months: $413/month, $4,736 interest

48 vs 72 months:
Pay $174/month more
Save $1,560 in interest
Own car 2 years earlier

Question 15

Example 3: Down Payment Impact

Accepted Answer

Problem:

Car Price: $32,000
Rate: 5%
Term: 60 months
Compare 0%, 10%, 20% down payment

Solution:

0% Down ($32,000 loan): $604/month, $4,240 interest
10% Down ($28,800 loan): $544/month, $3,816 interest
20% Down ($25,600 loan): $483/month, $3,392 interest

20% down saves:
$121/month
$848 in interest

Related Calculators

Need Help? Our auto loan calculator is perfect for anyone shopping for a car or looking to refinance. Calculate your car payment now and shop with confidence!

Disclaimer: Auto loan calculator provides estimates based on inputs. Actual loan terms, rates, and payments may vary based on creditworthiness, lender policies, and regional factors. Consult lenders for accurate loan quotes.

Auto Loan Calculator - Calculate Car Loan Payments

Vehicle Price

Down Payment & Trade-In

Loan Details

About This Calculator

Frequently Asked Questions

Related Calculators

Loan Payoff Calculator - Calculate Early Loan Payoff

Mortgage Calculator - Calculate Monthly Mortgage Payments

Loan Calculator - Calculate Monthly Loan Payments | Free Loan Calculator

Loan Payment Calculator - Calculate Monthly Loan Payments | Free Loan Calculator

Budget Calculator - Plan Your Monthly Budget

Investment Calculator - Calculate Investment Returns

Salary Calculator - Calculate Your Salary

Savings Calculator - Calculate Savings Growth

VAT Calculator - Calculate VAT (Value Added Tax)

Retirement Calculator - Plan Your Retirement Savings

ROI Calculator - Calculate Return on Investment

Amortization Calculator - Generate Loan Schedule

Interest Calculator - Calculate Interest | Free Interest Calculator

Interest Rate Calculator - Calculate Interest Rates

Loan Affordability Calculator - How Much Can I Borrow?

Mortgage Payoff Calculator - Calculate Early Payoff | Free Mortgage Payoff Calculator

Pay Down Mortgage Calculator - Calculate Extra Payment Impact

Refinance Mortgage Calculator - Calculate Refinancing Savings