Auto Loan Calculator

Plan your car purchase with accurate monthly payments, total cost, and a full amortization breakdown across the loan term.

How car loan amortization works

Each monthly payment covers both interest (calculated on the remaining balance) and principal (paying down the loan). Early payments are mostly interest; later payments are mostly principal. Our formula uses the standard amortization equation: M = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1), where P is the principal, r is the monthly interest rate, and n is the number of payments. The amortization schedule shows how each payment splits between interest and principal, and how the remaining balance declines over time. Early in the loan, most of your payment goes to interest because the interest is calculated on the full remaining balance. As the principal decreases, each month's interest charge falls, so more of the same payment goes toward principal, accelerating the payoff. This is why making extra principal payments early in the loan term has a dramatically larger effect on total interest paid than making the same extra payments later in the term.

Frequently asked questions

Should I finance through the dealer or get a bank loan?

Bank and credit union loans typically offer lower interest rates because they do not include the dealer markup — the dealer markup is how dealerships make profit on financing, and it can add 1-3% to your effective interest rate. Credit unions in particular consistently offer better auto loan rates than banks or dealerships. Getting pre-approved from your credit union or bank before visiting a dealership gives you negotiating leverage and a clear rate ceiling. However, dealer financing sometimes offers promotional rates (0-1.9% for new cars) that are below market rates — these are subsidized by the manufacturer to move inventory and can be a good deal if you qualify. Always compare the dealer financing offer against your pre-approved rate to see which is better.

What is a good interest rate for an auto loan?

As of 2024-2026, a good auto loan rate for a borrower with excellent credit (750+) is approximately 5-7% for a new car and 6-8% for a used car from a traditional lender. Rates above 10% are common for borrowers with fair credit (650-699), and rates above 15% indicate subprime borrowing. The Federal Reserve's rate decisions affect auto loan rates, but the used car market and dealer markups also have significant effects. Your actual rate depends on your credit score, loan term, down payment, and whether the car is new or used — newer cars get lower rates because they are lower risk (predictable value, full warranty coverage).

How does a larger down payment help?

A larger down payment reduces the principal, which reduces the total interest paid over the life of the loan, and also lowers your monthly payment. More importantly, a down payment of at least 10-20% signals to lenders that you have skin in the game, which can help you qualify for a better rate. Putting 0% down or being underwater (owing more than the car is worth) immediately after purchase is common with long-term loans on new cars, but it is a financial risk — if the car is totaled in an accident, the insurance payout may be less than the remaining loan balance. A general guideline is to make a down payment large enough that you are not underwater given a 20% drop in the car's value in year one.

What is the difference between 72-month and 84-month loans?

Longer-term loans have lower monthly payments but cost significantly more in total interest. A $25,000 car at 6.5% for 72 months costs $7,000 more in interest than the same car financed for 36 months. The 84-month loan has an even lower payment but risks being underwater for most of the loan term because cars depreciate fastest in years 1-3. Additionally, longer loans often come with higher interest rates and may include prepayment penalties. A general guideline: if you cannot afford the payment on a 36-48 month loan, consider buying a less expensive car rather than stretching the loan term to make the payment fit your budget.

Should I buy gap insurance?

Gap insurance covers the difference between what you owe on the loan and what the car is worth if it is totaled or stolen. It is worth considering if you made a small down payment (less than 20%), have a long loan term (72+ months), are financing a new car that depreciates quickly, or are leasing. The annual cost of dealer-offered gap insurance is typically $20-40 per year added to your loan, but you can often get it cheaper through your auto insurance provider. Many people who total a car in the first 2-3 years of ownership discover they owe more than the car is worth — gap insurance prevents this from being a financial catastrophe.

What is an auto loan pre-approval?

A pre-approval is a conditional loan offer from a bank or credit union that specifies the maximum amount, interest rate, and term you qualify for, based on a soft credit inquiry that does not affect your credit score. Pre-approvals typically last 30-60 days and give you a clear budget before you start negotiating with dealers. A common strategy: get pre-approved from your credit union or bank before visiting the dealership, negotiate the car's price separately from the financing (never let the dealer combine the two negotiations), and then compare the dealer financing offer against your pre-approved offer. Dealers sometimes match or beat bank rates to close the deal, and having a pre-approval in your pocket prevents the dealer from steering you toward higher-rate financing.

How does my credit score affect the rate I get?

Credit scores are the single largest determinant of your auto loan rate. A borrower with a credit score of 760+ typically qualifies for the best rates (approximately 5-6.5% for new cars in 2024-2026). A score of 660-719 might see rates of 7-10%, while scores below 660 often see rates of 11-18% or may not qualify for traditional financing at all. Your credit score is affected by: payment history (35%), amounts owed relative to credit limits (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%). You can improve your score over time by paying bills on time, reducing credit card utilization below 30%, keeping old accounts open, and avoiding new credit applications before a major purchase.

Last updated September 13, 2026

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