Financial Calculators
Car Loan Calculator

# Car Loan Calculator

Free car loan calculator uses the formula PMT = (R × A) / (1 - (1+R)⁻ⁿ) to help buyers calculate a car payment, analyze interest rates, and understand the total cost of an auto loan.

Result
Monthly Payment $719.30 Total Paid on Loan$25,894.80
Total Paid in Interest $1,894.80 There was an error with your calculation. ## Table of Contents ## Understanding the True Cost of a Car Loan For the average family, purchasing a vehicle is the single largest expense after housing. The ability to make smart financial decisions when buying new or used cars can significantly impact your monthly budget. Most financial experts advise keeping your auto loan payments between 10% and 15% of your monthly budget. Of course, this depends on each family’s unique situation, so being able to calculate the monthly payment and total cost of an auto loan is extremely important. ## Example Tony just got a new job in another city. His current assignment is close enough so that he can ride the train. However, Tony will need a car to commute to his new job. He believes he can afford a monthly payment of$500. Tony finds the perfect vehicle on a car dealership’s website listed for $25,000. Before heading to the dealership to test-drive his new car, he wants to quickly calculate the estimated monthly payment to ensure it fits his budget. A loan calculator for a car is the perfect solution. Two factors significantly impact the monthly payment on a car loan — the loan term and the interest rate. • The Interest Rate is the amount of money that the lender charges you to borrow the money for your new car. It’s best to try and get the lowest interest rate possible. You may need to speak to more than one lender before deciding on a loan. • The Loan Term is the amount of time you plan to borrow the money. Most auto loans range from 3 to 7 years (or 36 to 84 months). A longer loan will reduce the amount you will need to pay each month. However, because interest is added every month, the overall cost of the loan will be much higher than a shorter-term loan. ## Understanding the Car Loan Payment Formula The formula used to calculate a car loan payment can get quite complicated. The good news is that our loan payment calculator will do all of the work for you. However, it’s always a good idea to have a general understanding of how the calculation works. The formula to calculate a car loan payment is: $$PMT = \frac{(R × A)}{(1 - (1+R)^{-n})}$$ • PMT = Monthly Loan Payment • A = Amount Borrowed • R = Interest Rate • N = Loan Term (number of months, years, etc.) Note: Most auto loan lenders require payments to be made every month. If your loan is on a monthly payment schedule, use the monthly interest rate as the value for R. You can find the monthly interest rate by dividing your annual interest rate by 12. For example, if your bank charges a 5% yearly interest rate on a car loan, the monthly interest rate would be 0.416%. ## How to Use the Car Loan Calculator Our car loan calculator is easy to use. By providing just a few data points, you can quickly understand how an auto loan will affect your personal finances. • Step 1: Fill in the loan amount. This is the amount that you will borrow to purchase the car. This amount will be the car sale price minus any down payment or trade-in value applied to the loan. • Step 2: Fill in the loan term. The calculator allows you to enter the term in months or years. • Step 3: Fill in the interest rate. The car payment calculator assumes that you will make monthly payments. However, you should enter the annual interest rate (or APR) in this box. The calculator will automatically convert this down to the monthly interest rate. • Step 4: Click “Calculate” and review the results. When you click the Calculate button, the calculator will provide you with the monthly payment amount, the total cost of the loan (principal and interest), and the total interest paid over the life of the loan. From the results, you can also generate an amortization schedule by clicking on the "Create an Amortization Schedule" link. ## Real Example Let’s say you and your spouse just had a new baby. Unfortunately, your new car is too small for your larger family. You want to trade in your existing vehicle for a new minivan. The new van will cost$26,000. The car dealership will offer you $4,000 to trade in your old car. Your bank has offered you a 5-year loan at a 6% interest rate. Now you want to see the new monthly payment for the new vehicle. To run this calculation, enter the following values into the auto loan calculator: • Loan Amount:$22,000 ($26,000 minus the$4,000 trade in)
• Loan Term: 5 years (or 60 months)
• Interest Rate: 6%