Auto Loan Payment Calculator
Enter your vehicle price, down payment, trade-in and loan details to get your exact monthly payment
Payment vs Term Scenarios
Complete Loan Summary
Amortisation Schedule
| Period | Payment | Principal | Interest | Balance |
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How Car Loans Work
Understanding auto financing, amortisation and the true cost of buying a vehicle on credit
When you finance a vehicle, the lender pays the dealer the full price and you repay the lender — with interest — through fixed monthly payments. Your loan amount is the vehicle price minus your down payment and any trade-in value. Interest is charged on this amount using the reducing balance method: each month's interest is calculated on the remaining balance, not the original amount.
This means in month 1 most of your payment goes toward interest. By month 60 of a 5-year loan, almost your entire payment goes to principal. This is amortisation. The longer the term, the lower the monthly payment — but the more total interest you pay, and the longer you risk being upside-down on the loan (owing more than the car is worth as it depreciates).
The best financing strategy is to negotiate the car price separately from the financing. Dealers often make profit on both. Once you've agreed on price, compare dealer financing with rates from your bank or credit union — you may save significantly by pre-arranging financing before visiting the dealership.
Car Loan Payment Formula
Step-by-step explanation of how your monthly auto payment is calculated
- 1
Calculate the Loan Amount
Loan amount = Vehicle price − Down payment − Trade-in value. This is what the lender actually finances. Maximising your down payment and trade-in directly reduces interest paid.
- 2
Get the Monthly Rate
Divide the annual APR by 12 and by 100. For 6.5% APR: r = 6.5 ÷ 12 ÷ 100 = 0.005417 per month. Note: use APR not the stated interest rate to account for lender fees.
- 3
Apply the Amortisation Formula
M = L × r(1+r)ⁿ / [(1+r)ⁿ − 1] produces equal monthly payments where each month's interest is charged only on the outstanding balance — reducing as you pay down principal.
- 4
Calculate Total Cost
Total paid = M × n (term in months). Total interest = Total paid − Loan amount. Add back your down payment and trade-in to see the vehicle's full all-in cost.
- 5
Check Depreciation vs Balance
Cars depreciate while loan balances decline. Compare your estimated remaining balance each year against the car's expected market value to know if you're at risk of being upside-down on the loan.
Car Loan Rates by Credit Score
Typical APR ranges for new and used car loans across different credit tiers
| Credit Tier | Score Range | New Car APR | Used Car APR | Monthly on $25K / 60mo | Rating |
|---|---|---|---|---|---|
| 🌟 Super Prime | 780+ | 4.5%–6% | 5.5%–7.5% | ~$463–$483 | Excellent |
| ✅ Prime | 720–779 | 6%–8% | 7.5%–10% | ~$483–$507 | Good |
| 🔵 Near Prime | 660–719 | 8%–12% | 10%–15% | ~$507–$557 | Fair |
| 🟡 Subprime | 620–659 | 12%–17% | 15%–20% | ~$557–$618 | Poor |
| 🔴 Deep Subprime | Below 620 | 17%–25%+ | 20%–29%+ | ~$618–$737+ | Very Poor |
8 Tips to Get the Best Car Loan Deal
Smart strategies to reduce your rate, lower your payments and avoid common auto financing mistakes
Get Pre-Approved Before the Dealership
Apply for financing at your bank, credit union or online lender before visiting any dealership. Your pre-approval rate becomes your benchmark — dealers must beat it to earn your financing business. Credit unions typically offer 1–2% lower rates than banks for auto loans.
Improve Your Credit Score First
Moving from "fair" (660) to "prime" (720+) credit could cut your APR by 4–6%. On a $25,000, 5-year loan that's $1,500–$3,000 less in total interest. Check your credit report for errors, pay down credit card balances below 30%, and avoid new credit applications 3–6 months before applying.
Put at Least 20% Down on a New Car
A 20% down payment on a new car means you're financing 80% — keeping you above water as the car depreciates. New cars lose 15–20% of value in year one. With less than 10% down you may owe more than the car is worth for years, creating risk if you need to sell or the car is totalled.
Choose the Shortest Term You Can Afford
48-month loans cost significantly less in total interest than 72 or 84-month loans. Monthly payments are higher, but you build equity faster and pay less overall. Use the scenario cards above to see exactly how much a shorter term saves on your specific loan amount.
Get Multiple Trade-In Quotes
Dealers often offer 10–20% below market value for trade-ins because it's built into their negotiation. Before visiting a dealer, get quotes from CarMax, Carvana, Vroom and local competing dealers. The highest independent quote becomes your floor — dealers must match or beat it, or you sell your trade-in separately.
Negotiate Price and Financing Separately
Never reveal your monthly payment target to a dealer — they'll manipulate term length to hit any number. Agree on the vehicle price first (compare against invoice price and market data). Only then discuss financing. This prevents dealers from extending the term while appearing to help your budget.
Read Every Fee on the Contract
Dealerships add documentation fees ($300–$800), dealer prep fees, paint protection and extended warranties that can add $1,000–$4,000 to your financed amount. Every dollar financed costs more in interest. Scrutinise every line item and decline anything you didn't specifically request or price beforehand.
Consider Buying Used (2–3 Years Old)
A 2–3 year old car with low mileage retains most of its useful life but has already absorbed the steepest depreciation — typically 30–40% off new price. You finance less, pay less interest, and may qualify for the same manufacturer's certified pre-owned warranty. The math often strongly favours lightly used vehicles over new.
Frequently Asked Questions
Common questions about car loans, auto financing and getting the best deal