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How do I calculate a car loan payment?

Short answer

A car loan uses the standard amortization formula M = P x [r(1+r)^n] / [(1+r)^n - 1], where P is the amount financed, r is the monthly rate (annual rate divided by 12) and n is the number of monthly payments. As an example only, 25,000 over 5 years at an example rate of 6 percent is about 483.32 per month. A free auto loan calculator runs it instantly for any amount, rate and term.

What you actually finance

The loan amount is the price minus your down payment and any trade-in, plus taxes and fees if they are rolled into the loan. Using an example 25,000 financed over 60 months at an example rate of 6 percent, the monthly payment is about 483.32 and the total interest over the term is roughly 3,999. Only your lender can quote your real rate; the figures here are illustrations.

Term length is a trade-off

Stretching a car loan from 5 to 7 years lowers the monthly payment but raises the total interest, and because cars lose value quickly, longer terms increase the risk of owing more than the car is worth. Comparing a few terms side by side in the calculator makes that trade-off visible before you sign.

Step by step

  1. Enter the amount financed. Type the price minus your down payment and trade-in.
  2. Enter your rate and term. Use the rate the lender quoted and the term in months or years.
  3. Compare terms. Change the term to see how the monthly payment and total interest move.

Frequently asked questions

What is the payment on 25,000 over 5 years at 6 percent?

About 483.32 per month, using the example rate, with roughly 3,999 in total interest over the term.

Is a longer car loan cheaper?

The monthly payment is lower, but you pay more total interest and stay in negative equity longer since the car depreciates.

Does the down payment change the payment?

Yes. A larger down payment reduces the amount financed, which lowers both the monthly payment and the total interest.

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